The OPEC+ production cuts would lower overall real growth to 2.1% in 2023. Meanwhile, the non-oil growth is expected to average 5% and remain above potential

The International Monetary Fund (IMF) projected that the non-oil growth momentum in Saudi Arabia will remain strong in 2023, according to the financial agency’s report.

The OPEC+ production cuts would lower overall real growth to 2.1% in 2023. Meanwhile, the non-oil growth is expected to average 5% and remain above potential.

The report forecast that headline inflation will be contained this year, while the average consumer price index (CPI) will be slightly higher at 2.8% compared with 2022.

It also highlighted that strong currency, subsidies, and gasoline price caps offset inflationary pressures from diminishing labor market slack and a booming non-oil economy.

As for reserves, they are expected to stabilise at slightly lower levels of import coverage over the medium term, even if they remained well above standard reserve adequacy metrics.

As predictions of strong oil demand for the rest of the year persist, higher oil prices might change amid OPEC+ oil production cuts.

Furthermore, accelerated structural reforms and investment could boost growth.

On the other hand, a too-quick rise in non-oil investment could further hike domestic demand, hence adding pressure on prices and external accounts.

The headline seasonally adjusted Purchasing Managers Index (PMI) of Saudi Arabia retreated to 58.5 in May 2023 from 59.6 last April. However, the reading was still above the 50 growth mark and higher than its long-run average of 56.9.

Source: Zawya