Source: Saudi Gazette
LONDON – Saudi Arabia – as the world’s largest oil producer and exporter – does not feature prominently in the World Economic Outlook (WEO) October 2012, which was launched by the International Monetary Fund (IMF) at the start of the World Bank/IMF Annual Meeting in Tokyo Monday.
The Kingdom, however, comes out quite favorably as far as key economic indicators and projections are concerned. The annual percentage change for real GDP in Saudi Arabia was 7.1 percent in 2010, 6 percent in 2011 and projected at 4.2 percent in 2012. Similarly for consumer prices, the percentage change in 2010 was 5 percent, in 2011 it was 4.9 percent and is projected at 4.6 percent for 2012. The percentage change for current account balances is 26.5 percent in 2010, 26.1 percent in 2011 and is projected at 22.7 percent in 2012. These figures were well above the average for the MENA region as a whole.
But the WEO did not give any data or projections relating to unemployment in the Kingdom. The Kingdom’s Balance on Current Account as a percent of GDP totaled 14.6 percent in 2010 and 26.5 percent in 2011. The IMF projects this figure to total 26.1 in 2012, 22.7 percent in 2013, and 12.8 percent in 2017. The Outlook concludes that a general policy priority in the MENA region including Saudi Arabia is to secure economic and social stability through more inclusive medium-term growth. “Achieving this goal,” it continued, “will require institutional and regulatory reform to stimulate private sector activity and ensure greater and more equal access to economic opportunities and measures to address chronically high unemployment, particularly among the young. Maintaining macroeconomic stability while supporting strong, inclusive medium-term growth will be an important policy challenge. Increased spending on food and fuel subsidies, along with pressure to raise civil service wages and pensions, risks straining public finances.”
In oil exporters such as Saudi Arabia, it will be critical to “contain increases in spending on entitlements that are hard to reverse.” Instead, the advice is to focus on productivity-enhancing spending on human capital and infrastructure investment, which could also support diversification of their economies.
For oil exporters, warns the WEO, government expenditures have risen to such a degree that substantial declines in the price of oil could undermine fiscal positions. Despite significant accrued financial buffers such as reserves and foreign exchange holdings by central banks such as SAMA, such declines could put at risk ongoing infrastructure investment and growth.