Saudi Arabia’s immediate response to the COVID-19 pandemic has cushioned the impact on the economy which is now projected to grow by 4.3 percent this year with overall GDP growth seen at 2.4 percent, driven by the recovery of the non-oil sector and sovereign wealth fund, the International Monetary Fund (IMF) said.
The global financial institution appreciated the Saudi government for taking a swift and decisive response to the COVID-19 pandemic which helped soften its impact on people and firms.
“The Saudi economy entered the pandemic with strong policy buffers and reform momentum. The authorities responded quickly and decisively to the crisis with a range of fiscal, financial, and employment support programs that helped cushion the impact of the pandemic on the private sector. The economy is recovering well. The non-oil recovery that started in the second half of 2020 is expected to continue,” the IMF said.
Over the medium term, growth is expected to accelerate as the economic reform agenda begins to pay dividends. Inflation is expected at 3.2 percent in 2021, according to the report.
IMF expects that the private sector will lead the growth in 2021 to reach 5.8 percent, and it will continue in the medium and long term with an average growth of 4.8 percent.
The fund further added that the support from the kingdom’s sovereign wealth fund, the Public Investment Fund (PIF) and strong domestic demand will propel economic growth.
In January, the PIF launched a five-year strategy, with the aim of doubling its assets to $1.07 trillion and plans to invest a minimum of $40 billion a year into the domestic economy until 2025 to create 1.8 million jobs. It will contribute $320 billion to the kingdom’s non-oil economy. The fund aims to grow assets under management to over $2 trillion by 2030.
The IMF welcomed the rapid increase in the role of women in the Saudi economy as well as changes that allow expatriate workers to move between jobs more easily. The continued increase of female participation in the economy will boost productivity, growth, and household incomes, the global financial institution pointed out.