IMF: Saudi economy to grow 6.5% in 2011

Saudi Arabia's overall real Gross Domestic Product (GDP) growth is projected to reach 6.5 per cent in 2011 with inflation likely to rise to about 6 per cent as a result of both domestic and imported factors, the International Monetary Fund (IMF) said on Tuesday. Masood Ahmad, Director of the Middle East and Central Asia Department, said, “The Saudi economy has continued to strengthen in 2010 and early 2011, driven by a strong increase in non-oil GDP reflecting a rebound in the private sector supported by increased government spending and a recovery in global demand and higher oil prices as the world economy emerges from the global financial crisis." Overall real GDP growth rose from 0.1 per cent in 2009 to 4.1 per cent in 2010. Profitability of corporates listed on the stock exchange also improved significantly in 2010—net profits were 56 percent higher than in 2009. The banking sector, he said, continues to hold capital above statutory requirements and credit growth is rising. "With government spending and oil production now also increasing, available leading indicators point to a further strengthening of activity in the first quarter of 2011," he said. “Looking ahead, the economy is poised for continued robust growth. Oil production is increasing further to compensate for lower output elsewhere in the region. As a result, both fiscal and external balances are likely to register strong surpluses. Reflecting the positive momentum, overall real GDP growth is projected by the IMF to reach 6.5 percent in 2011 with inflation likely to rise to about 6 per cent as a result of both domestic and imported factors." Saudi Arabia is the biggest Arab economy which is the only Arab member of the G20 club of the world's most powerful economies. “The strong near-term economic outlook provides an opportunity to address longer-term priorities. As emphasised in recent Royal Decrees, high among these are providing jobs and housing for the growing population," Ahmad said. Key steps will be to continue progress in diversifying the economy, building on the positive business environment, and continuing to improve access to finance for SMEs as well as for housing. "The new policy initiatives entail spending commitments over the next several years which will reduce fiscal surpluses and it will be important that the additional spending be undertaken in a way that complements private sector activity. Ensuring the efficiency of public spending will be key to realizing an appropriate return from the increased government investments,” he concluded.