The International Monetary Fund (IMF) has commended Saudi Arabia for its significant progress in structural reforms, urging the kingdom to continue its efforts despite oil price fluctuations.
Following its annual consultation with Saudi Arabia, the IMF highlighted the country’s successful shift towards a more diversified economy, driven by the Vision 2030 initiative. This ambitious plan aims to reduce dependence on oil through major projects like King Salman Park and the futuristic city of Neom.
Amine Mati, the IMF’s mission chief to Saudi Arabia, emphasized the importance of maintaining reform efforts regardless of oil market volatility. Key areas for continued focus include governance improvement, investment efficiency, digitalization, and labor market reforms.
Saudi Arabia’s non-oil growth is expected to rise to 4.4% in the medium term, supported by the Vision 2030 plan. The kingdom’s overall economy is projected to grow by 4.7% in 2025, with an average growth rate of 3.7% in subsequent years.
Last year, non-oil GDP grew by 3.8%, driven by private consumption and investment. Despite a slight overall GDP decline of 0.4% in the second quarter, the economy is forecasted to grow by 1.7% this year and 4.7% in 2025.
Saudi officials, including Investment Minister Khalid Al Falih and Finance Minister Mohammed Al Jadaan, have indicated that Vision 2030 projects may be adjusted due to economic and geopolitical challenges. The IMF supports recalibrating these projects to prevent overheating and ensure fiscal sustainability.
The IMF also praised Saudi Arabia’s efforts to boost female labor participation, which has already surpassed the Vision 2030 target of 30%. Additionally, the kingdom’s digitalization initiatives were acknowledged as vital components of its reform strategy.
While annual inflation is expected to decrease to 1.9% by year-end, rents continue to rise due to expatriate inflows and redevelopment plans. The IMF noted that global uncertainties pose balanced risks to Saudi Arabia’s economic outlook, with potential downsides including deviations from the reform agenda and global economic slowdowns.
Geopolitical events remain a risk, though they have not significantly impacted the economy yet. On the upside, accelerated reforms and investments could boost growth. The IMF advised maintaining strong fiscal buffers, aligning monetary policy with the US Federal Reserve, and strengthening banking regulations.
The IMF also highlighted the need for additional efforts to support Saudi Arabia’s 2060 net-zero targets. Although the debt-to-GDP ratio has risen to 26%, it remains below the 40% threshold set by Saudi authorities, indicating comfortable fiscal buffers.