IMF testifies to the accelerated growth of the Saudi economy as a result of financial and regulatory reforms

 
The IMF issued a positive report on the kingdom of Saudi Arabia following the conclusion of the discussions of the Article IV consultations with the kingdom, during which it confirmed that the financial and regulatory reform agenda in the kingdom contributed to accelerated growth of the Saudi economy, while containing inflation, and reducing the unemployment rate to its lowest levels historically, praising the continuous economic transformation and efforts to diversify the economy under Vision 2030.
The report praised the macroeconomic policies and accelerated mobility in the kingdom, which contributed to enhancing the growth of non-oil activities, increasing employment rates until they exceeded the pre-Corona pandemic figures, in addition to the increase in the percentage of women's participation in the labor market to more than 35%; exceeding the target of Saudi Vision 2030, which is 30%.
The Fund welcomed the long-term financial planning measures in the kingdom, which contributed to supporting the implementation of Vision 2030 initiatives, projects and programs, while mitigating the risks of a surge in economic activity, stressing that the financial space in the kingdom is solid, and that sovereign debt risks are low, and also pointed out that the abundance of financial reserves in the kingdom has limited the effects of regional and global challenges.
The report stressed that the ongoing reforms in the kingdom, including ensuring the effective application of regulations, rationing fees, enhancing human capital, raising the participation rate of Saudi women in the labor market, facilitating access to finance, and improving governance, have contributed to enhancing the growth of the private sector, attracting more foreign direct investment, as well as significant progress in the field of digital transformation and artificial intelligence that supports these efforts.
The IMF Executive Board praised the kingdom's leading role in multilateral international work, including its chairmanship of the IMF's International Monetary and financial affairs committee, and its contributions to meeting global challenges.
The Fund noted the increase in the activity of the services sector, including transport, trade, tourism and finance, supported by the strong growth of consumption volume, which reached 5.7%.
He pointed out that applications for foreign investment licenses achieved record levels, as they almost doubled in 2023 compared to 2022, including the submission of 330 companies to obtain licenses to establish their regional headquarters in the kingdom.
The report reviewed the developments of the banking sector in the Kingdom, stressing that it is characterized by strong ratios of solvency and liquidity, and its resilience to shocks, pointing out that it is based on a strong foundation, and also pointed to the efficiency of banking intermediation according to indicators of profitability, infrastructure and competitiveness.
He also pointed to the increase of the Saudi stock market index "Tadawul" by 14.2% in 2023, surpassing the "Morgan Stanley" index for emerging markets of 7%, progress in the possible technical environment for investment, and the licensing of three digital banks, stressing the contribution of this to enhance financial inclusion and competitiveness, as these banks are characterized by flexibility and innovation.
The report noted the effective management followed by the kingdom in dealing with the risks arising from the rapid growth of mortgage lending, through diversified government support, the robustness of banks, a full mortgage, and other assistance measures, and highlighted improvements in the automation of the national assessment matrix of the risks of money laundering and terrorist financing, and enhancing the accuracy of the analysis of risk data received from reporting entities, including financial technology companies.
He explained that the increase in non-oil revenues reflects the effectiveness of the existing reforms, which directly contributed to enhancing compliance, praising the customs procedures keeping pace with international best practices.
The Fund expects the non-oil sector (which includes government activities) to grow by 3.5% in 2024, supported by high domestic demand, and that the inflation rate in the kingdom will remain stable at about 2% in the medium term, supported by the riyal's peg to the US dollar, and domestic policies consistent with Saudi Vision 2030.
The Fund stressed that the kingdom has one of the lowest levels of intensity of carbon dioxide emissions compared to all major energy producers, due to the ongoing reforms in the environmental field and the kingdom's quest to achieve zero neutrality in 2060, praising the kingdom's success in securing a 30-year purchase agreement for the green hydrogen project in NEOM; to achieve its quest to exploit renewable energy sources.
The Fund noted the determination of the kingdom's government to build one of the largest carbon capture and storage plants in the world, which will work to capture approximately 44 million tons of carbon annually by 2035, and will be operational by 2027 with a capacity of 9 million tons of carbon dioxide annually, praising the current efforts of the kingdom to capture 1.3 million tons of carbon annually through the SABIC plant and the Ottoman gas plant.