IMF says Saudi Arabia growth to slow to 2.1% in 2023 on oil production cuts

THE International Monetary Fund (IMF) expects growth in Saudi Arabia to slow to 2.1 per cent in 2023 on the back of Opec+ production cuts announced in April, it said in a statement on Wednesday (Jun 7), lower than its latest forecast released in May.

The Fund had forecast Saudi GDP growth at 3.1 per cent last month. The Saudi economy grew 8.7 per cent last year, as high oil prices boosted revenue and led to the kingdom’s first budget surplus in almost 10 years.

On Sunday, Saudi Arabia’s energy ministry announced the country would make a further voluntary cut of 1 million barrels per day to its oil output in July, but the impact on prices has been muted as global worries and an uncertain demand outlook weigh.

The IMF, in its latest Article IV mission concluding statement, said that while April’s cuts would reduce overall growth to 2.1 per cent, non-oil growth is expected to remain robust.

“...non-oil growth is expected to average 5 per cent in 2023 and remain above potential as strong consumption spending and accelerated project implementation boost demand,” the statement said.

The IMF also said that Saudi Arabia’s fiscal balance would swing to a deficit in 2023 on lower oil revenue. It did not provide an updated figure for its projected deficit, but its May report stated a deficit of 1.1 per cent of GDP in 2023.

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“Potential additional dividends from Aramco could improve the fiscal position”, the IMF statement said.

The Saudi government has forecast a second consecutive budget surplus for this year, albeit narrower than in 2022. REUTERS