The International Monetary Fund (IMF) said that Saudi Arabia’s Vision 2030 economic and social reform plan was starting to pay off for the Kingdom, according to a report issued by the fund after a mission visit.
“Economic reforms have started to yield positive results. Non-oil growth has picked-up, female labor force participation and employment have increased, the successful introduction of the value-added tax has underpinned an increase in non-oil fiscal revenues, energy price reforms have helped reduce per capita consumption of gasoline and electricity, measures have been introduced to compensate low and middle-income households for the higher costs resulting from reforms, and fiscal transparency has increased,” the IMF said.
“Reforms to the capital markets, legal framework, and business environment are progressing well,” it added.
The IMF’s report, available here, describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’).
The fund noted that challenges remain for Saudi leadership in certain areas.
“Government spending has risen, supporting growth but raising medium-term fiscal vulnerabilities to lower oil prices,” the IMF said. “Fiscal consolidation is needed to reduce these vulnerabilities. More generally the economic footprint of the public sector is still large. The unemployment rate of nationals remains high. Job creation is a key challenge identified under the government’s reform program. To deliver a diversified, productive and competitive economy, reforms need to make Saudi nationals more competitive for private sector jobs, raise foreign direct investment, and increase the availability of finance for young and growing companies.”
Higher public spending will push Saudi Arabia’s budget deficit to 7% of gross domestic product this year, the International Monetary Fund said on Wednesday.