IMF head urges more Saudi reforms as economy expands

• Kingdom has doubled share of women in labour force
• ‘Productive discussions’ about climate change
• IMF plans to set up a regional office in Riyadh

The head of the International Monetary Fund (IMF) has urged Saudi Arabia to maintain its reform momentum to help achieve longer-term prosperity as the economy continued to expand during September.

IMF managing director Kristalina Georgieva hailed the “impressive progress” in implementing Saudi’s Vision 2030 reform agenda, notably the doubling of the share of women in the labour force in just four years. 

“We also had productive discussions about the existential threat of climate change and the vital importance of an orderly energy transition,” she said in a statement following a two-day visit to the kingdom.

• IMF urges Saudi to explore new taxes to boost non-oil revenues
• ‘The biggest construction site the world has ever seen’
• Accountability ‘crucial’ for success of Saudi Vision 2030

During her visit she met with the Minister of Energy Prince Abdulaziz bin Salman, Minister of Finance Mohammed Al-Jadaan, Central Bank governor Fahad Al-Mubarak, Minister of Investment Khalid Al-Falih, Minister of Economy and Planning Faisal Alibrahim and management of the Public Investment Fund (PIF).

Georgieva described the annual meeting of GCC finance ministers and central bank bosses as “exceptionally constructive”, adding: “We agreed on the need to continue dialogue on the ongoing economic reforms in the region and to enhance our coordination efforts to support countries in the region and tackle global crises.”

Georgieva also revealed plans for the IMF to establish a regional office in Riyadh.

The visit coincides with the latest S&P Global Saudi Arabia Purchase Managers Index (PMI) results which showed the non-oil economy continued to expand in September. 

Growth was underpinned by strong gains in both output and new orders, while firms continued to bolster their purchasing activity.

Job creation was also sustained, but at a slower pace as confidence softened a little compared to August. 

Cost pressures remained broadly stable while output charges rose only modestly as the September PMI survey recorded 56.6 which, although down on August’s 57.7, signalled an improvement in the health of the Saudi private sector for a 25th successive month.

David Owen, economist at S&P Global Market Intelligence, said: “Albeit down on August, Saudi Arabia’s non-oil private sector economy retained an impressive pace of growth during September, especially against the backdrop of increasingly challenging global economic conditions. 

“Both output and new orders rose at rates above their averages for their current 25-month growth sequences, while confidence in the quality of goods and services provided meant firms expect to successfully convert into hard contract wins a high proportion of what is an extremely positive pipeline of new business.”

He added: “Moreover, with costs rising at a broadly average rate, combined with a keenness among non-oil companies to maintain competitive pricing policies, inflationary pressures presently appear to be contained.” 

Latest data showed a further recruitment of new staff, although growth was only marginal and the weakest in the current six-month sequence as backlogs of work fell for a fourth month in a row. 

According to the survey, firms retained a high degree of confidence that production will continue to increase over the coming 12 months, linked to expectations of a continuation of strong sales and a healthy pipeline of new work. That said, sentiment was a little lower than August and down to its weakest level since May. 

Saudi authorities said last week in a pre-budget statement that real GDP growth is expected to hit eight percent this year, driven by the oil sector. The non-oil sector is set to grow by just under six percent while preliminary data suggests inflation will average 2.6 percent.

The kingdom also estimates 2023 budget revenue at $299.5trn with a $2.4bn surplus.