Riyadh – Mubasher: Saudi Arabia’s economy is strongly recovering from the COVID-19 pandemic’s repercussions, the International Monetary Fund (IMF) recently stated.

The signalled recovery was attributed to strong liquidity and fiscal position, reforms within Saudi Vision 2030, as well as high oil prices and production.

The Kingdom’s overall economic growth rate reached 3.2% in 2021, endorsed by the rebounding non-oil sector and large Saudi workforce. The IMF expects that the growth rate will rise to 7.6% in 2022 despite a tight monetary policy.

Furthermore, the overall fiscal balance increased by nearly 9% of gross domestic product (GDP) to a 2.3% of GDP deficit in 2021, backed by oil revenues and non-oil tax income which was supported by a tripling of the value-added tax (VAT) rate to 15% in mid-2020, besides a rebounding economy.

Higher oil prices and large-scale oil production also climbed by 8.5% in 2021, resulting in a surplus of 5.3% of GDP. Inflation in Saudi Arabia remained still at 3.1% last year, driven by the hike in mid-2020 VAT and low international food and commodity prices. Meanwhile, the Kingdom’s inflation rate went up by 2.7% year-on-year (YoY) in July 2022.

The IMF noted that the low passthrough of international goods would help in containing Saudi Arabia’s inflation rate at 2.8% in 2022, regardless of inflationary pressures from the wholesale prices, which soared by 6.8% YoY in July 2022.

The IMF executive directors called for further efforts to boost non-oil revenue mobilisation through tax policy measures, including maintaining the current VAT rate and reinforcing revenue administration.