Saudi Arabia's Economic Diversification Receives Strong Endorsement from IMF

The International Monetary Fund (IMF) has issued a positive assessment of Saudi Arabia's economic progress, highlighting the kingdom's "unprecedented economic transformation" in a recent report. The report comes after an official visit to Saudi Arabia by IMF officials.

The IMF's praise centers on Saudi Arabia's efforts to diversify its economy away from its historic dependence on oil revenue. The report projects the kingdom's overall Gross Domestic Product (GDP) to accelerate to around 4. 5% by 2025, before stabilizing at a steady 3. 5% growth rate in the following years. More significantly, the report forecasts non-oil GDP growth to reach 3. 5% in 2024, with a projected rise in the coming years. This indicates a successful transition towards a more diversified economic base.

The report acknowledges the impact of short-term oil production adjustments. Oil output is expected to contract by 4. 6% in 2024 due to production cutbacks, but a rebound to 5. 1% growth is anticipated in 2025. This reflects a planned extension of production cuts in the near term, followed by a gradual recovery that should see oil production reach 10 million barrels per day by 2025.

The IMF also commends the health of Saudi Arabia's financial sector. The report describes the sector as being on "strong footing, " noting that bank credit growth, particularly within the corporate sector, continues to outpace deposit growth. This trend is projected to hold steady at around 10% in 2024. The report attributes this positive development to the Saudi Arabian Monetary Agency's (SAMA) ongoing efforts to modernize the country's regulatory and supervisory frameworks.

The IMF emphasizes the importance of SAMA's role in safeguarding financial stability. The report recommends continued use of macroprudential tools, which are policy measures designed to prevent excessive risk-taking in the financial system. This strategy aims to mitigate potential risks that could arise from a credit boom.

The IMF's report serves as a strong endorsement of Saudi Arabia's economic reform efforts. The kingdom's commitment to diversification appears to be yielding positive results, with growth projected to move beyond its traditional dependence on oil revenue. The continued focus on financial sector stability will be crucial in maintaining this momentum as the kingdom navigates its economic transformation.

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