IMF trims Saudi growth forecast on oil output cuts

Unsplash/Ervan Sugiana

Saudi Arabia’s real GDP will slow to 2.1 percent in 2023 following Opec+ production cuts declared in April, according to the International Monetary Fund.

The IMF projected GDP growth at 3.1 percent last month after the Saudi economy grew strongly at 8.7 percent in 2022, as surging oil prices boosted revenue to drive the kingdom’s first budget surplus in almost a decade.

The country’s energy ministry recently announced further voluntary cuts of one million barrels per day to its oil output in July.

In its latest Article IV mission concluding statement, the IMF thought overall growth will dampen, and non-oil growth is expected to average five percent in 2023 and remain above potential as strong consumer spending and accelerated project implementation boost demand.

However, it said Saudi Arabia’s fiscal balance will swing to a deficit in 2023 on lower oil revenue without giving a figure for its projected deficit. In May, the fund expected a deficit of 1.1 percent of GDP in 2023.

“Robust non-oil revenue and lower spending, mostly because of one-off expenditure cuts, will improve the non-oil deficit, which would, however, remain considerably higher than budgeted.”

Potential additional dividends from Saudi Aramco will improve the fiscal position, the statement said.

Headline inflation will be contained this year, the IMF stated. Average CPI will be slightly higher at 2.8 percent than in 2022, despite a strong currency, subsidies and gasoline price cap offsetting inflationary pressures.

Last December, the Saudi government indicated a second consecutive budget surplus in 2023, but narrower than in 2022 due to an uncertain global economic outlook and lower crude prices.