The International Monetary Fund (IMF) has recently updated its forecast for Saudi Arabia’s economic growth, now anticipating a robust 6 percent increase by the year 2025, a slight uptick from an earlier 5.5 percent estimate.
Despite this positive adjustment for 2025, the IMF anticipates a modest dip in the Kingdom’s economic expansion to 2.6 percent in 2024, a slight 0.1 percent decrease from previous expectations.
The broader Middle East and Central Asian region are also expected to see growth, with projections at 2.8 percent for 2024 and 4.2 percent for 2025.
The World Bank has also revised its outlook on the Saudi economy more favorably, suggesting a growth rate of 5.9 percent in 2025, up from a prior 4.2 percent projection.
Taming inflation should be a priority
The IMF estimates that the global economy will sustain its growth rate of 3.2 percent through 2024 and 2025. Furthermore, a decrease in global headline inflation to 5.9 percent is expected this year, following an average of 6.8 percent in 2023.
However, the financial institution cautions that the battle against inflation is not yet won. IMF Economic Counsellor Pierre-Olivier Gourinchas emphasized the importance of remaining focused on inflation reduction, noting that while trends are positive, the situation has not fully stabilized.
Gourinchas pointed out that the recent decline in inflation rates can be attributed to falling energy prices and the easing of supply-chain issues. Nevertheless, oil prices have seen a recent uptick due to geopolitical tensions, and inflation within the services sector remains persistently high.
Global economic recovery differs by region
The global economy showcased resilience in 2023, yet the recovery has been uneven, with low-income countries still grappling with the pandemic’s long-term impacts.
Gourinchas expressed concern over the prolonged challenges faced by low-income developing nations and stressed the scarring effects of the pandemic and living cost crises on these economies.
The IMF is urging nations to strengthen their fiscal buffers to safeguard against sovereign debt risks and to work towards reversing the downward trend in medium-term growth prospects.
As the world navigates a path to economic stabilization, Gourinchas advocates for policies that bolster global economic resilience, which includes the strategic rebuilding of fiscal reserves to withstand ongoing financial pressures.