Saudi Arabia was fastest growing G20 economy in 2022, IMF visitors say

Saudi Arabia had the fastest growing economy of all the G20 group of rich and developing nations in 2022, an International Monetary Fund mission said at the end of its official visit to the Kingdom.

Growth in the year was 8.7 percent, driven by strong oil production and a 4.8 percent expansion of the non-oil sector. This was driven by robust private consumption and non-oil private investment, including giga-projects, the statement said.

The IMF visit was undertaken as part of regular consultations under the organization’s articles of agreement. While its views do not necessarily represent those of the IMF’s board, they will be considered by its executive in making a final decision.

The statement said the Kingdom’s unemployment rate in 2022 fell to a record low of 4.8 percent, from 9 percent during the pandemic. This was due to an increase in jobs, including Saudi workers in the private sector and expatriate workers in the construction and agricultural sectors.

Female participation in the workforce rose to 36 percent in 2022, exceeding the 30 percent target set under Vision 2030.

Despite the booming economic activity, inflation in the Kingdom remains low and appears to be easing. Inflation has been contained because of the domestic subsidies/price cap and a strong US dollar. The average growth in the consumer price index in 2022 was 2.5 percent.

The IMF visitors welcomed plans to increase renewable energy, generate savings through efficiency programs, deploy carbon capture, usage and storage technologies, and become the world’s leading hydrogen exporter.

The IMF visitors said the Saudi economy was benefiting from strong private investment, non-oil growth momentum and an ongoing program of reforms. They also commended the Vision 2030 reform agenda toward a productive and sustainable economy, especially in the fields of digitalization, the regulatory and business environment, female participation in the workforce and higher private sector investment.

The visitors also welcomed plans to increase renewable energy, generate savings through efficiency programs, deploy carbon capture, usage and storage technologies, and become the world’s leading hydrogen exporter.

The statement said the Kingdom’s public debt was low and sustainable, with fiscal space available to address potential headwinds.

Despite the most encouraging findings, the IMF staff highlighted some downsides, including the short-term risk of lower oil prices due to subdued global activity and a shift in demand for fossil fuels that could hamper growth in the medium to long term.

However, the Kingdom’s National Industrial Strategy, which aims to reduce reliance on oil, and the establishment of special economic zones should help to mitigate those risks.

I believe the IMF staff fairly assessed the position of the Kingdom’s economy in 2022 and welcomed its plans to increase renewable energy to become the world’s leading hydrogen exporter. This is supported by efforts to reduce emissions by 278 million tons per year by 2030 and achieve net zero by 2060.

• Talat Zaki Hafiz is an economist and financial analyst. Twitter: @TalatHafiz