IMF sees pickup in Saudi Arabia's economy

The IMF expects real GDP growth to increase to 1.9 percent in 2018 with non-oil growth strengthening to 2.3 percent. (Shutterstock)
Updated 25 August 2018

IMF sees pickup in Saudi Arabia's economy

  • The findings are contained in a report from the Washington-based organization published on Friday following the conclusion of its consultations with the Kingdom last month

LONDON: Saudi Arabia is moving ahead with economic reforms and growth in its non-oil economy is expected to accelerate, according to the IMF.

The findings are contained in a report from the Washington-based organization published on Friday following the conclusion of its consultations with the Kingdom last month.

It commended the government for progress made to date in pursuing its reform agenda and emphasized that the stronger oil price should not slow momentum.

The IMF expects real GDP growth to increase to 1.9 percent in 2018 with non-oil growth strengthening to 2.3 percent.

“The authorities are continuing with their fiscal reforms including through the introduction of the value added tax (VAT) and further energy price increases at the beginning of 2018.”

The lender also noted that inflation had increased in recent months with the introduction of VAT as well as higher gasoline and electricity prices. It forecast inflation of about 3 percent this year before stabilizing at around 2 percent over the medium term.

The IMF was broadly upbeat on the Saudi banking sector with credit and deposit growth although weak, expected to strengthen due to higher spending and non-oil growth.

Bank profitability was also expected to increase as interest margins widen and banks remain well capitalized.

The IMF findings coincide with intense investor scrutiny of Saudi Arabia’s plans for its national oil company, Saudi Aramco.

Saudi Energy Minister Khalid Al-Falih said on Thursday the government remained committed to the IPO “at a time of its choosing” while dismissing media reports that the sale had been shelved.

Analysts at Capital Economics do not see significant immediate economic impact from a delayed IPO.

“We don’t think another delay would have a significant direct impact on Saudi Arabia’s economy or financial markets in the near-term,” it said in a report on Thursday.


Britain, EU tell each other to move on trade

Updated 20 October 2020

Britain, EU tell each other to move on trade

  • Both sides call on each other to protect billions of dollars of trade between the neighbors

BRUSSELS: Britain and the EU said on Monday the door was still open for a deal on their post-Brexit relationship, calling on each other to compromise to find a way to protect billions of dollars of trade between the neighbors.

With just over two months before Britain ends a status quo transition arrangement with the EU, talks on a trade deal are deadlocked, with neither wanting to move first to offer concessions.

A no-deal finale to Britain’s five-year Brexit drama would disrupt the operations of manufacturers, retailers, farmers and nearly every other sector — just as the economic hit from the coronavirus pandemic worsens.

European Commission Vice President Maros Sefcovic repeated on Monday that the EU still wanted a trade deal but not “at any cost” after British Prime Minister Boris Johnson said on Friday there was no point in continuing talks.

“It has to be a fair agreement for both sides — we are not going to sign an agreement at any cost,” Sefcovic told reporters after meeting Michael Gove, Britain’s point man on the existing divorce agreement, in London.

“The EU is ready to work until the last minute for a good agreement for both parties,” Sefcovic said.

Britain, increasingly frustrated by the EU’s refusal to start text-based talks, called on the bloc to make the first move, with its housing minister saying that Brussels only had to make “some relatively small but important changes.”

Housing Secretary Robert Jenrick called on the EU to “go that extra mile, to come closer to us on the points that remain for discussion.”

A spokesman for Johnson again ruled out prolonging any negotiation beyond the end of this year, when the transition period runs out, saying the EU “must be ready to discuss the detailed legal text of a treaty in all areas with a genuine wish to respect UK sovereignty and independence.”

EU chief negotiator Michel Barnier had been due in London for talks with British counterpart David Frost this week. Instead, they will now speak by telephone on Monday to discuss the structure of future talks, Barnier’s spokesman said.

Negotiations broke down on Thursday, when the EU demanded Britain give ground. Issues still to be resolved include fair competition rules, including state aid and fisheries. EU diplomats and officials cast Johnson’s move as a frantic bid to secure concessions before a last-minute deal was done, and European leaders have asked Barnier to continue talks.

British officials have repeatedly said any deal has to honor Britain’s new status as a sovereign country and not try to tie it to EU rules and regulations.

German Chancellor Angela Merkel said compromises on both sides would be needed. French President Emmanuel Macron said Britain needed a deal more than the 27-nation EU.

Britain is launching a campaign this week urging businesses to step up preparations for a no-deal departure. In a statement accompanying the launch, Gove says: “Make no mistake, there are changes coming in just 75 days and time is running out for businesses to act.”

More than 70 British business groups representing over 7 million workers on Sunday urged politicians to get back to the negotiating table next week and strike a deal.