IMF says oil cuts phase-out will aid Saudi economy

Saudi Aramco

The phase-out of oil production cuts is expected to help increase Saudi Arabia’s overall growth to 4.7 percent in 2025, the International Monetary Fund (IMF) has said.

However, growth is expected to average 3.7 percent annually beyond 2025, the fund said in its latest staff report.

Despite the contraction of 0.8 percent in overall growth last year due to oil production cuts, non-oil GDP grew by 3.8 percent thanks to robust private consumption and non-oil investment.

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Non-oil growth is forecast to reach 4.4 percent in the medium term, following a slight moderation in 2024, supported by stronger domestic demand and accelerated project implementation.

The kingdom’s unemployment rate reached historic lows, with women’s labour force participation rates surpassing the 30 percent target set for 2030.

Inflation, after peaking at 3.4 percent year-on-year in January 2023, fell to 1.6 percent in May 2024. The IMF expects inflation to remain contained, supported by the country’s stable currency peg to the US dollar and consistent domestic policy measures.

• Saudi oil receipts drop to a three-year low
• New factories underpin Saudi non-oil activity surge
• Maersk opens logistics park in Jeddah

Meanwhile, rents are rising by 10 percent, driven by an influx of expatriates and large-scale redevelopment projects in Riyadh and Jeddah.

Although the IMF said geopolitical events have had little impact on the Saudi economy, potential risks to lie ahead.

These include delays in the reform agenda, subdued global activity, financial market volatility, geopolitical tensions, and growth in non-Opec+ oil supply.

The faster-than-expected shift in global demand away from fossil fuels could hamper growth, the IMF warned.