Al-Masjid Al-Nabawi, Saudi Arabia. Picture: ISTOCK
Al-Masjid Al-Nabawi, Saudi Arabia. Picture: ISTOCK

Beirut — Saudi Arabia’s economy will stall in 2017 with growth "close to zero" due to lower oil revenue, the IMF says.

The fund lowered its 2017 growth forecast to 0.1% from 0.4%, citing Opec production cuts, uncertainty over oil prices and the structural reforms the country is undertaking to reduce its reliance on crude, the IMF said on Friday, concluding its Article IV consultation. The IMF also lowered its non-oil growth projection to 1.7% from 2.1% — compared with actual growth of 0.2% in 2016.

Nonoil growth is expected to pick up this year

Lower oil prices and austerity measures are weighing on Saudi Arabia’s economy, which contracted in the first quarter for the first time since 2009 — illustrating the scale of the challenge facing the country’s new heir, Crown Prince Mohammed bin Salman, as he implements his blueprint for a transition away from oil dependency.

The IMF said it welcomed the government’s direction, which it said would help the fiscal deficit "narrow substantially in the coming years".

"Nonoil growth is expected to pick up this year and overall growth is expected to strengthen over the medium term as structural reforms are implemented," the IMF said. It cautioned the government to monitor the impact of the fiscal measures and to "make corrections if needed".

Saudi Arabia’s fiscal deficit was expected to narrow to 9.3% of GDP in 2017 and to just under 1% by 2022, from 17.2% in 2016.

The IMF said it commended Saudi Arabia’s plan to remove energy subsidies, encouraging a "more gradual phasing of the price increases to allow households and businesses more time to adjust".

Bloomberg

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