Brighter Saudi economic outlook boosted by reforms, says IMF

A number of big infrastructure projects such as Jeddah’s new $7.2 billion King Abdulaziz International Airport are expected to bolster economic expansion. (Instagram)
Updated 23 May 2018
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Brighter Saudi economic outlook boosted by reforms, says IMF

  • An IMF team reported that growth was expected to pick up this year and over the medium-term “as reforms take hold.” 
  • Saudi Finance Minister Mohammed bin Abdullah Al-Jadaan: The statement “confirms the progress made by the Kingdom’s government in implementing economic and structural reforms.”

LONDON: Saudi Arabia’s “ambitious” reform program is set to accelerate the Kingdom’s economic growth this year, according to the International Monetary Fund (IMF).
Following discussions with Saudi officials, an IMF team led by Tim Callen reported that growth was expected to pick up this year and over the medium-term “as reforms take hold.” 

It added: “The primary challenges for the government are to sustain the implementation of reforms, achieve the fiscal targets it has set, and resist the temptation to re-expand government spending in line with higher oil prices.”

The report said considerable progress was being made to improve the business climate. Recent efforts had focused on the legal system and business licensing and regulation. The public procurement law that is being updated had a key role to play in strengthening anti-corruption policies, said the IMF.
Saudi Finance Minister Mohammed bin Abdullah Al-Jadaan said that the statement “confirms the progress made by the Kingdom’s government in implementing economic and structural reforms.”
Jean Michel Saliba, Middle East economist at Bank of America Merrill Lynch, expressed some concern that higher oil prices could encourage the government to take its foot off the fiscal prudence accelerator.

 

He said: “The IMF report is in line with our views that, while oil prices allow the Saudi government to support a pick-up in economic activity while minimizing the impact on fiscal balances, the key risk that higher oil prices bring is that medium-term (spending targets) are not adhered to.”
However, the IMF identified several encouraging KSA initiatives. The introduction of value-added tax was said to be a “milestone achievement” in strengthening the tax culture and tax administration of the country. Energy price reforms and the introduction of citizens’ accounts to compensate the less well-off for higher energy/VAT costs were also welcomed.
The IMF said that the Kingdom’s privatization and public and private partnership program, recently approved, should be accelerated.
It said: “A balance is needed between pursuing financial development and inclusion and financial stability. Increased finance for smaller businesses, more developed debt markets and improved financial access especially for women as envisaged under the Financial Sector Development Program will support growth and equality.”
Targeting a balanced budget in 2023 was lauded as being “appropriate,” and the Saudi government was advised to focus on delivering on this objective. “Limiting the growth of government spending would be necessary to achieve fiscal targets,” said the IMF.
Reforms to strengthen the budget process and the fiscal framework, increase fiscal transparency, and develop macro-fiscal analysis were said to be making good progress.
But broadening the coverage of fiscal data beyond the central government would ensure a more complete assessment of the government’s impact on the economy.
“While the public sector can be a catalyst for the development of some new sectors, it is important that it does not crowd out private sector involvement, nor remain a long-term player in markets where private enterprises can thrive on their own,” the IMF said.

More needs to be done to ensure that an accurate and timely assessment of economic developments is possible.

IMF

The IMF recommended that government policies should focus on sending clear signals about the limited prospects for public employment, easing restrictions on expatriate worker mobility, further strengthening education/training, and continuing to support increased female participation. While progress had been made in increasing data availability, “more needs to be done to ensure that an accurate and timely assessment of economic developments is possible.” 

Earlier this month, the ministry of finance published first quarter fiscal indicators that showed the Kingdom — which is making concerted efforts to diversify its oil-reliant economy — has projected a deficit of SR195 billion ($52 billion), or 7.3 percent of gross domestic product (GDP), this year, down from SR230 billion last year. It plans to balance the budget by 2023.
First-quarter revenues reached SR166.3 billion, up 15 percent from the same period last year, the ministry said in a statement.
Non-oil revenues jumped 63 percent to SR52.3 billion, partly due to a 5 percent value-added tax (VAT) that the government introduced in January.
Oil revenues rose 2 percent but the low figure was a result of a change in the way dividends are distributed and a stronger number is expected in the second quarter.
The IMF expects Saudi economic growth to hit 1.7 percent in 2018 after falling into negative territory last year.
A number of big-ticket infrastructure projects such as Jeddah’s new $7.2 billion King Abdulaziz International Airport are expected to bolster economic expansion.
In global energy markets, with crude trading at close to $80 per barrel, leading investment banks have forecast prices could go higher.
Supplies are being squeezed by the collapse of production from OPEC member Venezuela as well as worries about Iranian supplies following President Donald Trump’s decision to reimpose sanctions on Iran.

FASTFACTS

The IMF expects Saudi economic growth to hit 1.7 percent in 2018 after falling into negative territory last year.


Australian court fines Apple $6.7 million over iPhone ‘bricking’ case

Updated 20 min 28 sec ago
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Australian court fines Apple $6.7 million over iPhone ‘bricking’ case

SYDNEY: An Australian court fined US electronics giant Apple Inc. A$9 million ($6.7 million) on Tuesday after a regulator accused it of using a software update to disable iPhones which had cracked screens fixed by third parties.
The Australian Competitor and Consumer Commission (ACCC) sued the world’s biggest company by market value for “bricking” — or using a software update to disable — hundreds of smartphones and tablet devices, then refusing to unlock them if the devices had been serviced by non-Apple repairers.
On Tuesday the Australian Federal Court found in the regulator’s favor, saying Apple had breached the country’s consumer law by telling some 275 customers they were not eligible for a remedy if their device had been repaired by a third party.
“The mere fact that an iPhone or iPad had been repaired by someone other than Apple did not, and could not, result in the consumer guarantees ceasing to apply,” ACCC Commissioner Sarah Court said in a statement.
“Global companies must ensure their returns policies are compliant with the Australian Consumer Law, or they will face ACCC action,” Court said.
An Apple spokeswoman said in an email the company had “very productive conversations with the ACCC about this” without commenting further on the court finding.
The ACCC said after it told Apple about its investigation, the US company sought to compensate customers whose devices were made inoperable by the software update, known as “error 53.” So far, Apple had contacted about 5,000 customers, the ACCC said.
Apple has also offered to improve staff training, information about warranties and consumer law on its website, and processes to ensure compliance, the ACCC said.