Saudi Arabia is proceeding at a steady pace on the road to recovery with an increase in investment capital due to the growth of non-oil GDP by 3% during the current year.
According to Arabiya Net, the Institute of International Finance stated in a report released yesterday that the real non-oil GDP is expected to grow 3% this year after a contraction 7.2% over the past year, and real GDP growth of 4.2% in 2021 and 1.3% for the next year, driven by non-oil growth of 3% and 9.3%, respectively.
According to the report, large public investment fund projects will be supported, while monetary policies will remain available until it recovers well, expecting a slight increase in capital flows to non-resident foreigners to reach About $ 47 billion this year, and that increased potential growth requires deeper structural reforms that go beyond mega-national projects.
and the report indicated that Saudi Arabia achieved a recovery thanks to its relatively young population, the decrease in the share of services in the GDP, and a set of precautionary measures to limit the spread of the virus and the number of deaths, and it has been implemented. Authorities have a set of measures to mitigate economic damage, including fiscal packages, loosen monetary and macroprudential rules, and provide adequate liquidity to the banking system, according to the Middle East newspaper.
The report stated that the banking system continues to be resilient, supported by capital centers, sound primary liquidity and response by the central bank, revealing the potential for some profitability challenges to affect a price environment. Low interest rates banks' ability to expand private sector credit considerably reduces spending.
The report stated that the Kingdom is resuming fiscal control by reducing capital spending with the possibility that it will be matched by an increase in the role of the Public Investment Fund in financing many mega projects. Oil, along with the recovery of non-oil revenues, will reduce the fiscal deficit from 9.11% of GDP last year to 3.4% in 2021.
The report added that the foreign reserves of the Saudi Central Bank are estimated at $ 453 billion, exceeding the $ 250 billion estimated to protect the riyal’s peg from speculation, stressing that foreign perceptions of the kingdom’s financial situation Optimistic, as evidenced by the strong demand for its bonds and the relatively low spreads in the international emerging market bond index of 90 basis points, while stressing the need for deeper structural reforms to encourage private sector-led growth and create appropriate new jobs, while progress in digital transformation helps side Along with the ongoing reforms to diversify the economy away from oil and boost potential growth, which has stalled in recent years.
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