(EnergyAsia, June 22 2012, Friday) — As a result of weaker oil prices, Saudi Arabia’s economy is expected to grow by 6% this year after expanding 7.1% last year, said the International Monetary Fund (IMF).
In a report issued after an IMF team met with Saudi officials last month, the fund praised the government for providing “important support to the global economy during a period of high global uncertainty, including through its actions in stabilising the global oil market.”
It said increased Saudi production helped “ease pressures on global oil prices” that earlier in the year had threatened to re-test the record high level of US$147 a barrel of July 2008.
The IMF said the outlook for the Saudi economy remains buoyant with “prudent management” enabling its non-oil sector to grow at a 30-year high rate of 8% in 2011.
The team, led by Masood Ahmed, its Director of the Middle East and Central Asia Department, stated:
“Higher imports and increased workers’ remittances linked to the strong growth of the Saudi economy, together with expanded financial assistance have exerted a positive spillover and helped support other economies in the region and beyond.
“Real GDP is projected to grow by 6% in 2012. The private sector is again expected to lead the way, reflecting the increased role of the private sector in the economy, a clear break from the past.
“Inflation is likely to remain modest at about 5% in 2012, but should be monitored carefully for signs that the economy is overheating.
“Fiscal and external surpluses are expected to remain very strong at almost 17% and 27% of GDP, respectively.
However, given the current external environment and possible spillovers to global oil markets, the outlook is subject to some uncertainty.”
It urged the government to take advantage of the kingdom’s strong economy by pressing ahead with reforms to reduce dependence on oil exports.