IMF crowns Saudi Arabia as G20’s fastest-growing economy

The Kingdom’s move to the top of the charts follows its Vision 2030 reforms and reduced reliance on oil revenues, while it has also resisted calls to drop some subsidies

IMF/Majalla

The move to the top of the world economy’s most-watched league table comes as the Vision 2030 reforms cut oil dependence. While the IMF opens a Riyadh office, Saudi is sticking with some subsidies.

IMF crowns Saudi Arabia as G20’s fastest-growing economy

Faisal Faeq

last update on 07 Sep 2023

Saudi Arabia’s economy has become the fastest growing in the G20, the influential club of major nations, helped by the country’s ambitious reform plans and a low unemployment rate.

The landmark moment for the Kingdom was revealed in new figures from the International Monetary Fund, which found growth of 8.7% for 2022 in the value of goods and services as measured by gross domestic product (GDP). Non-oil sectors, the focus of the Vision 2030 reforms, grew by 4.8%.

Taking the top spot in the main league table of major world economic powers shows how far the Kingdom has come with its plans to diversify away from dependence on oil. The GDP growth rate also exceeded the 7.6% forecast by the IMF for the year.

Saudi Arabia's economic achievements, as lauded in the latest IMF’s report. #SaudiVision2030 #Article_IV_Consultation_2023 pic.twitter.com/9UlC4yd0E6
— CIC Saudi Arabia (@CICSaudi) September 6, 2023

And the process is continuing. The proportion of non-oil revenue hit 43% in the second quarter of 2023, reaching about $84bn, or 314.8bn riyals and up from 32% in the same period a year before. Non-oil investments rose 45% driven by the acceleration of mega projects.

Inflation also remained low, even as the economy boomed. Saudi’s Consumer Price Index averaged 2.5% in 2022, and is “currently declining”, the IMF said. It added that inflation was “contained thanks to domestic support, price caps, and the strength of the US dollar”.

The Vision 2023 reforms are helping the Kingdom become more resilient to falls in the price of oil, which remains its biggest export. Last year, the price of Brent crude reached about $100 while it was less than $80 by September 2023.

This decline reduced revenue from oil exports and came as manufacturing slowed in China and spending levels fell in the United States.

The proportion of non-oil revenue hit 43% in the second quarter of 2023, reaching about $84bn, or 314.8bn riyals and up from 32% in the same period a year before. Non-oil investments rose 45% driven by the acceleration of mega projects.

Subsidies stay

But the Kingdom was determined to carry on providing the highest subsidies to domestic fuel prices in the G20, to help shelter its citizens from wider global inflation.

It also maintained the exchange rate peg to the dollar to support monetary stability.

Nonetheless, there was praise from the IMF, which opposes subsidies, for the wider Saudi economic reforms and Vision 2030 does include ambitious plans for the energy sector. It seeks productivity improvements to help keep the public finances strong for as long as possible.

An IMF office in Riyadh

The IMF plans to open an office in Riyadh, which will support its development programme in the region from there.

It highlights the importance of the Saudi capital as a leading international centre for reform, helping the IMF's activities among the country's friends and neighbours.

The IMF plans to open an office in Riyadh, which will support its development programme in the region from there. It highlights the importance of the Saudi capital as a leading international centre for reform, helping the IMF's activities among the country's friends and neighbours.

Saudi Arabia is one of seven countries with an independent seat on the IMF's Executive Board and is also among the top 20 countries supporting the IMF and its resources.

The IMF is sometimes criticised for the strict conditions it imposes when coming to the aid of nations. Its models do not always fit the disparate economies and societies it deals with and can be inflexible.

Saudi Arabia's strong relations with the IMF – and the Kingdom's rejection of some of the organisation's advice on subsidies – come in changing times as old orthodoxies face new, rising powers.

The IMF is not a political organisation. Rather, it has a clear role to play in fostering international monetary cooperation, maintaining financial stability, facilitating international trade, pushing for higher employment and sustainable economic growth, and reducing poverty around the world.

Saudi Arabia's status as the fastest-growing economy in the G20 shows it had room to stand by the price caps on gasoline that helped its citizens remain free of uncertainty, even as it embraces ambitious change.

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