The International Monetary Fund raised its estimate for Saudi Arabia’s economic growth by nearly three percentage points after Russia’s war on Ukraine drove oil prices higher.
The kingdom’s gross domestic product is now seen expanding 7.6% this year before slowing to 3.6% in 2023, the IMF said Tuesday in its World Economic Outlook. The Washington-based lender cut its growth forecast for the world economy for 2022 by 0.8 percentage points to 3.6%, and also lowered its predictions for the U.S., China and India.
The projected acceleration for Saudi Arabia reflects both higher oil production and stronger-than-anticipated growth in the non-oil sector, according to the IMF.
The kingdom’s economy expanded 6.7 per cent on an annual basis during the fourth quarter of 2021, according to official estimates. The Finance Ministry expects GDP to grow 7.5 per cent this year, in line with the Fund’s latest projections.
Current prices of oil, the kingdom’s main source of income, are well above the level Saudi Arabia needs to balance its budget, prompting S&P Global Ratings to forecast the first surplus since 2013.
S&P and Fitch Ratings have raised the Saudi sovereign outlook to positive from stable, with the latter predicting a budget surplus of nearly 7 per cent of GDP this year.
The IMF estimates oil prices will average $106.83 a barrel in 2022, driven higher by Russia’s invasion of Ukraine, before coming down to $92.63 in 2023.