Saudi economy: Three dimensional performance

The words and phrases used are telling: “Economic performance has been exceptionally strong . . . outlook remains buoyant . . . and reflecting prudent economic management, the economy is likely to remain buoyant.”
That is not an in-house press release, but one from the International Monetary Fund (IMF) after its mission concluded a consultation trip to Riyadh recently ending with an overall, general view of the Saudi economy.
Moreover, the IMF expects that the Kingdom’s economy to continue building on what it has achieved last year, that its real GDP is to grow again by 6 percent against an overall growth of 7.1 percent in 2011, with nonoil sector registering the highest growth rate of 8 percent since 1981 and the private sector scoring a respectable 8.5 percent and at the time both fiscal and external surpluses came out with a healthy growth of 17 percent and 27 percent of the GDP respectively. The robust performance should help push for more economic reforms that can help strengthen the Saudi economy and puts it along the path to reform many of its economic and fiscal institutions and more important provide more job opportunities to nationals, which was and will remain an area for more concern. However, the impact of strong Saudi economy far exceeds its territory.
On one hand, it helped playing a crucial role in stabilizing the oil market, pumping more supplies to help ease the tightness of the market, soften the gasoline prices and send a wave of relief to the troubled economies around the world and mainly in Europe.
Moreover and as Masood Ahmed, director of Middle East and Central Asia at the IMF, who covers Saudi Arabia, said the Kingdom’s high import bill and remittances from expatriates and foreign laborers back home was helping easing some of the pressures on some countries.
Remittances alone amounted to SR26.8 billion, or around $7.1 billion during the second quarter of last year only.
That is a huge amount of money leaving the country. And its sheer volume has prompted the labor ministry to voice its concern and hinted at regularizing that trend by putting a ceiling cap on these transfers. Yet still these remittances represent a good portion of hard currency earnings in some countries. And that is another stabilizing role played by Riyadh on regional and international arena. Aside from this there is the direct aid be it fiscal or through the Saudi Fund for Development in addition to what private investors pour in other countries providing finances to new projects in addition to job opportunities.
In addition, there is the continuous role played by Riyadh in the world financial institutions. Last April, for instance, the Kingdom joined with other countries during the spring meetings to provide the IMF with fresh $430 billion that help the monetary body to meet the looming crisis in the euro zone area.
It was interesting to note that Japan topped the list of contributors by providing $60 billion to the IMF, to be followed in the second stage by Britain, South Korea and . . . Saudi Arabia with each providing $15 billion.
The list did not include substantial contributions from the US, rest of Europe or the new emerging economies of China, India, Brazil and Argentina.
While the first group was not in a good financial position to contribute, the latter or mainly the BRIC ones were raising question marks that top management running those organizations should not be restricted to only the US and Europe. Rather it should reflect new realities on ground that new emerging economies need to have their chance to lead as well.
The Kingdom has managed to maintain its IMF board membership through its 3.2 percent stake along with other seven countries, though it did not raise officially its desire to play a more direct role in influencing IMF policies.
The issue is getting a new dimension as the troubled areas are no longer African and Asian countries, but the very Western countries, which used to lecture others on how to run their economies.
The semi economic meltdown of Greece and probably Spain has pushed the European Union to face to the tough political questions of whether to continue tolerating national sovereignty or go for a super state at the expense of national ones, which will make sense of the monetary union that has been preached for so long, but with no willingness to give it the flesh and substance it needs.
That is why this month’s meeting of the G20 in Mexico could speed up the discussion on the role new and emerging economies can play.
Already the US has launched a preemptive step by recommending an American with South Korean origin Jim Young Kim to head the World Bank.
The surprise pick seems addressed to quell the criticism by bringing a new body born abroad and with global interest in health issues, but still American.
— Alsir Sidahmed is media consultant, trainer and freelance journalist.