IMF gives strong assessment of KSA economic reforms

Time: August 04, 2019  

The executive board of the International Monetary Fund (IMF) has commended the Saudi authorities for the progress in implementing their economic and social reform agenda, including the introduction of the value-added tax and energy price reforms.
In their assessment report completed on July 10, the executive board affirmed that reforms taken by the Saudi government have started to yield positive results and that the outlook for the economy is positive.
The board emphasized the importance of the Kingdom’s commitment to prudent macroeconomic policies and appropriate prioritization of reforms, which will lead to promoting non-oil growth, creating jobs for nationals, and achieving the objectives of Vision 2030 reform plan.
It has underscored the importance of fiscal consolidation, key to rebuilding fiscal buffers and reducing medium-term fiscal vulnerabilities. It also encouraged the Saudi authorities to build on their fiscal reforms by continuing with planned energy and water price adjustments and increases in expatriate labor fees.
It encouraged the Saudi government to continue its efforts in connection with improving expenditure management and strengthening the country’s fiscal framework, noting that, despite the important reforms, spending has increased. The board welcomed reforms to strengthen public procurement, which will help to improve the efficiency of government spending and reduce the risks of corruption.
The IMF, however, considered that publishing more detailed budgets and spending execution data would enhance fiscal transparency, and viewed a robust asset-liability management framework as essential to guide analysis of the public sector balance sheet, cash flows and risk versus return trade-offs.
The statement issued by the board welcomed the ambitious reforms taken by the Saudi government in connection with developing the non-oil economy by strengthening the business environment and implementing effective industrial policies that could encourage the development of new sectors of the economy.
It said that the policies taken by the government to develop new economic sectors would be successful if Saudi workers posses the necessary skills for the labor market. Therefore, wages and productivity must be well aligned and labor market policies should focus on setting clear expectations by strengthening education and training and increasing female employment.
The board welcomed the review of social assistance programs to ensure they provide adequate support to those in need and are well-targeted. They also welcomed the continued resilience of the financial sector and ongoing capital market reforms.
Lastly, the board commended Saudi Arabia’s ongoing strengthening of the AML/CFT framework and its recent membership of the Financial Action Task Force.
The IMF Executive Board Assessment (2) of the Saudi government economic, financial and social reforms is fair, especially when it is linked to the expected positive result of the national economy stated in the statement released by the IMF mission last May upon conducting the 2019 Article IV (1) consultations.
Talat Zaki Hafiz is an economist and financial analyst.

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Saudi Arabia boosts spending in second quarter as business reforms quicken

Time: July 30, 2019  

The Finance Ministry reported a widening budget gap of about SR33.5 billion. (Shutterstock)
  • The Finance Ministry reported a widening budget gap of about SR33.5 billion

LONDON: Saudi Arabia increased spending in the second quarter as the government boosted stimulus measures to spur growth.

The Finance Ministry reported a widening budget gap of about SR33.5 billion ($8.9 billion) for the period.
“A key positive trend is the pickup in capital expenditure, which points to some progress with investment activity and is likely to be in line with a wider trend,” Monica Malik, chief economist at Abu Dhabi Commercial Bank, told Bloomberg.
A weaker oil price is encouraging Gulf states to quicken economic reforms aimed at reducing reliance on hydrocarbons while boosting job-creating capital expenditure on major projects.
“The results reflect the progress made in the realization of developmental projects according to the Kingdom’s 2030 Vision and confirm the efficiency of the financial and structural reforms implemented by the government,” said Finance Minister Mohammed Al-Jadaan in a statement carried by the Saudi Press Agency.
“These reforms include the diversification of government revenue sources by increasing non-oil revenues, reforming and developing the Public Financial Management to raise the efficiency and effectiveness of spending through many measures including the adoption of a government procurement system,” added Al-Jadaan.
Social protection expenditures were increased in programs such as the Citizen Account Program along with Social Security, cost of living allowance and student rewards.

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Saudi Finance Ministry welcomes positive IMF report on Kingdom’s economic health

Time: July 24, 2019  

Main entrance to the Saudi Ministry of Finance headquarters in Riyadh. (MOF photo)
  • The IMF said it expects non-oil real growth in Saudi Arabia to rise to 2.9 percent in 2019

RIYADH: The Saudi Ministry of Finance on Tuesday welcomed a statement issued by the executive board of the International Monetary Fund in which it commended the progress made by the Kingdom in the implementation of financial, economic and social reforms.

It followed the IMF’s latest Article IV consultations with Saudi Arabia, which concluded on July 10. These regular, usually annual, consultations are carried out to assess a nation’s economic health and development, and identify any potential problems that could cause instability.

The IMF said it expects non-oil real growth in Saudi Arabia to rise to 2.9 percent in 2019 thanks to increased government spending and growing confidence in the economy. The organization said the government’s continued commitment to prudent economic policies and structural reforms will be key factors in promoting non-oil growth, job creation and achieving the goals set out in Vision 2030.

The board in particular welcomed reforms aimed at improving the management of public finances, including a new government procurement system that will help to make government spending more efficient and reduce the risk of corruption. It also praised the efforts being made to enhance the transparency of public finances, and the reforms adopted by the government to develop the non-oil economy. It stressed the need to rebuild fiscal surpluses and reduce the risks to public finances in the medium term, and emphasized that containment of the government wage bill and an increase in capital expenditure in a systematic manner could help to generate financial savings for this year.

The board also highlighted the Kingdom’s strong financial sector and ongoing reforms in the Saudi financial markets. It praised the ongoing efforts to strengthen the Anti-Money Laundering and Combating Financing of Terrorism (AML/CFT) framework, and its recent accession to full membership of the anti-money laundering watchdog the Financial Action Task Force. The Saudi Government’s commitment to joining the IMF Standards for Data Dissemination by the end of this year was also commended.

“The statement affirms that Saudi Arabia has made good progress in implementing economic and structural reforms and that these reforms are bearing fruit and are reflected in economic performance,” said Minister of Finance Mohammed Al-Jadaan. “The Board sees that the outlook for the Saudi economy is positive.”

He added that the IMF board’s assessment reflects the ambitious reform efforts being made by the Kingdom at all levels, and stressed that the government is working to achieve financial and economic targets in accordance with the aims of Vision 2030 to maintain financial stability, achieve high economic-growth rates and support economic diversification through special initiatives, programs and projects that contribute to these objectives.

Al-Jadaan also welcomed the board’s endorsement of the government’s reforms, including measures to support financial sustainability, the financial markets, the expansion of financial services and the implementation of AML/CFT legislation and procedures at all levels in institutions.

He added that the new competition and procurement system will help to improve transparency, regulation and governance of procedures related to government procurement, in accordance with the best global practices.

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Saudi economy expands by 1.7 percent in first quarter

Time: July 16, 2019  

Saudi Arabia’s non-oil private sector growth was the big winner, climbing to an 18-month high in June. (Reuters)
  • WTI futures gained 30 per cent in the first three months of the year while Brent crude was up 25 percent over the quarter

RIYADH: Saudi Arabia’s economy grew at 1.7 percent in the first quarter of 2019, the Kingdom’s media ministry said on Monday.
The expansion reflects ongoing economic reforms and the modernization of the financial sector, analysts said.
The Kingdom’s non-oil private sector growth rose to an 18-month high in June, according to PMI data released earlier this month.
Financial analyst Talat Zaki Hafiz told Arab News the positive economic growth trend, especially in the non-oil economy, showed that ongoing reforms were producing results.
“The commitment of the Saudi government is to diversify the economy and move it from dependence on oil, and this is what we see — the mix of non-oil and oil revenue,” he said.
A recovery in the oil price in the first three months of the year has also spurred growth.
WTI futures gained 30 per cent in the first three months of the year while Brent crude was up 25 percent over the quarter.

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Saudi economy measure hits 19-month high despite geopolitical worries

Time: July 04, 2019  

Caught in the middle of a global trade war and regional political tensions with Iran, Gulf economies such as Saudi Arabia and the UAE are seeking to introduce rapid economic reforms as their oil revenues come under pressure. (Shutterstock)
  • Purchasing managers’ index reveals that inflows of new orders from abroad rose for the fourth month running

LONDON: A key business output measure has hit a 19-month high in Saudi Arabia driven by new business growth but tempered by geopolitical worries.

The Emirates NBD Purchasing Managers’ Index revealed that inflows of new orders from abroad rose for the fourth month running.

However, overall business confidence in Saudi Arabia and neighboring UAE has suffered from rising regional geopolitical tensions, which has increased in recent months following attacks on shipping.

“While both output and new work increased at a solid rate in June, there was almost no change in private sector employment,”  said Khatija Haque, head of regional research at Emirates NBD. “Firms remained optimistic about future output, although this component of the survey declined to the lowest level since August 2018, possibly reflecting heightened geopolitical tension in the region.”

Caught in the middle of a global trade war and regional political tensions with Iran, Gulf economies such as Saudi Arabia and the UAE are also seeking to introduce rapid economic reforms as their oil revenues come under pressure amid rising shale production in the US and faltering global demand.

The headline seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index rose to 57.4 in June, up from 57.3 in May and the highest since November 2017. A reading above 50 indicates expansion.

FASTFACT

The Saudi Purchasing Managers’ Index rose to 57.4 in June, up from 57.3 in May.

“In contrast to the headline PMI, output growth in Saudi Arabia’s non-oil private sector slowed to a three-month low during June. That said, the rate of expansion remained sharp and was broadly in line with the long-run series average,” Emirates NBD said.

June also saw a second consecutive monthly rise in average cost burdens faced by non-oil private sector businesses in the Kingdom. Despite this, the rate of inflation was fractional and eased from May.

Business confidence towards future growth prospects was strongly optimistic during June, Emirates NBD said.

Sami Al-Obaidi, chairman of the Council of Saudi Chambers.

The Kingdom is seeking to grow foreign direct investment as part of a broader economic reform push.

Sami Al-Obaidi, chairman of the Council of Saudi Chambers, told the Arab British Economic Summit in London yesterday that it was important to boost economic cooperation and investment ties with the UK.

PMI data also released yesterday for the UAE reported a decline from 59.4 in May to 57.7 in June.

Backlogs of work increased amid reports of delays in receiving payments from customers, the bank noted.

Non-oil companies remained strongly optimistic that business activity will increase over the coming year, although sentiment eased again from April’s record high.

Next year’s Expo 2020 was highlighted as a key factor behind overall business optimism.

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Women’s participation in Saudi labor force at highest growth rate among G20

29/06/19

Saudi women make up 23 percent of Saudi Arabia’s labor force. (File/AFP)
  • The Kingdom’s labor force comprised of 23 percent female in 2018
  • our countries – Argentina, US, India and China – saw a decrease in women’s participation in their labor forces

DUBAI: Saudi Arabia recorded the highest growth rate of women joining the labor force over the past 20 years among the G20 countries, Pew Research Center data revealed, as the group steps up efforts to promote women empowerment.

According to the research, the Kingdom’s labor force comprised of 23 percent female in 2018, an increase of seven percent from 1998 figures, owing to an ongoing national push to empower locals as part of the Saudi Vision 2030.

This represents the highest increase among the G20 member states, followed by Australia and Germany, both recording a six percent increase.

Four countries – Argentina, US, India and China – saw a decrease in women’s participation in their labor forces, with economic giant China recording an 11 percent decrease over the past two decades.

These numbers come as more people in the G20 nations “are strongly in favor of increased gender equality in their country,” according to the US research center.

The G20 countries previously committed to a 25 percent reduction in the gap between the shares of men and women participating in their countries’ labor forces by 2025.

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Labor, Islamic Affairs ministries discuss ways to further develop Saudi nonprofit sector

Time: June 18, 2019  

Saudi Islamic Affairs Minister Sheikh Abdullatif Al-Asheikh receives Dr. Tamader bint Youssef Al-Rammah, deputy minister of labor and social development, at his office in Riyadh. (SPA)

RIYADH: Saudi Islamic Affairs Minister Sheikh Abdullatif Al-Asheikh held a meeting with Dr. Tamader bint Youssef Al-Rammah, deputy minister of labor and social development at his office in Riyadh during which they discussed aspects of joint cooperation between their respective ministries to further develop the nonprofit sector in line with Saudi Vision 2030.

Al-Rammah said that the two ministries could jointly work to promote moderate values in society.

Recently, the Islamic Affairs Ministry successfully carried out a project in 35 countries around the world to promote Islamic values of moderation and tolerance.

The program included scientific activities, preaching, advocacy, awareness lectures and training sessions.

The Saudi Labor Ministry is also taking steps for the empowerment of all citizens, including women and those with disabilities, to ensure a prosperous future for the country and achieve sustainable development.

It also aims to increase the nonprofit sector’s sustainable economic contribution to the gross domestic product from 0.3 to 0.6 percent, and the percentage of workers in the sector from 0.13 to 0.32 percent of the total workforce.

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Saudi oil reserves close in on world’s top spot

Time: June 12, 2019  

BP raised its estimates of Saudi Arabia’s crude oil reserves at the end of last year by 12%. (AFP/File Photo)
  • Saudi proved oil reserves were revised to 297.7 billion barrels
  • Increase due to Kingdom reporting separately oil, gas and natural gas liquids (NGL) reserves

Estimates of Saudi Arabia’s crude oil reserves have increased by 12 percent, closing in on Venezuela’s top spot in the world.

In the first major change to the estimated reserves since 1989, BP revised Saudi Arabia’s proved oil reserves to 297.7 billion barrels at the end of 2018 from 266.2 billion a year earlier, only slightly behind 303 billion in Venezuela.

Canada was third with 168 billion barrels, followed by Iran with 156 billion and Iraq with 147 billion.

FASTFACTS

Saudi oil reserves

Saudi Arabia’s proved oil reserves were revised to 297.7 billion barrels at the end of 2018, BP said on Tuesday. The estimate is considerably higher than both its previous estimate and a certification by consultants DeGolyer and MacNaughton announced in January. The latter estimate put the Kingdom’s proven oil reserves at the end of 2017 at about 268.5 billion barrels, including reserves in the Partitioned Zone jointly owned by Saudi Arabia and Kuwait.

In its benchmark 2019 Statistical Review of World Energy, BP recalibrated some Saudi gas reserves as oil after Saudi Arabia started separate reporting of oil, gas and natural gas liquids (NGL) reserves, BP chief economist Spencer Dale said.

Saudi Arabia has begun reporting its reserves as it prepares to float the national energy company Saudi Aramco. The listing was postponed and is now planned for early next decade.

HIGHLIGHTS

• BP revised Saudi Arabia’s proved oil reserves to 297.7 billion barrels at the end of 2018 from 266.2 billion a year earlier.

• BP recalibrated some Saudi gas reserves as oil after KSA started separate reporting of oil, gas and natural gas liquids reserves.

Riyadh has rarely changed its oil reserves estimates in the past, despite pumping 8-10 million barrels per day.

BP also said oil reserves for the US, which became the world’s top producer in 2018, were revised upwards by 22 percent to 61.2 billion barrels from 50 billion barrels at the end of 2017.

Overall, global reserves were little changed at 1,729.7 billion barrels, about 50 years’ supply at current levels of global demand.

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Saudi private sector growth rises to 17-month high

Time: June 11, 2019  

Saudi Arabia’s private sector was subdued last year as it felt the impact of fuel price hikes. (Shutterstock)
  • Business bounces back after ‘relatively soft’ 2018
  • Purchasing Managers’ Index well above the 50 mark indicating expansion

DUBAI: Saudi Arabia’s non-oil private sector growth rose to a 17-month high in May as credit conditions improved, output expanded and output prices increased, a monthly survey of companies showed on Monday.

The seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index rose to 57.3 in May from 56.8 in April, well above the 50 mark indicating expansion.

Saudi Arabia’s private sector was subdued last year as it felt the impact of fuel price hikes, the introduction of a 5 percent value-added tax and the higher cost of hiring foreign workers.

But it has rebounded this year, with the index for purchasing managers averaging 56.8 points so far against last year’s average of 53.8.

“The gradual rise in the headline PMI this year suggests that growth in the Kingdom’s non-oil private sector is recovering after a relatively soft 2018,” said Khatija Haque, head of MENA research at Emirates NBD.

Job creation accelerated slightly to 50.5 in May from 50.1 a month earlier. Though still weak, May’s rise in employment was the biggest jump since January.

Output prices for goods and services rose for the first time in seven months after a significant drop in April.

Output rose in May for the fifth month in a row, with the subindex climbing to 61.4 from 61.2 in April. This largely reflected improved demand conditions, according to the survey’s authors.

Meanwhile, growth in the UAE’s non-oil private sector rose in May at its fastest pace since October 2014, although job creation was largely stagnant, the PMI survey showed.

The index for the UAE rose to 59.4 in May from 57.6 a month earlier.

Stronger demand, marketing activity and the start of new projects all reportedly contributed to the increases, with companies largely expecting growth to continue over the coming year, the survey’s authors said.

External demand rose at the fastest pace in the index’s nearly 10-year history as new work from Saudi Arabia and Oman in particular pushed the rate of growth in new export orders, according to survey respondents.

“While the rise in the headline PMI indicates faster GDP growth in the UAE’s non-oil private sector, the environment remains a challenging one for businesses,” said Haque.

Output and new order growth has come on the back of price discounting and new export orders, with job creation and wages remaining stagnant, Haque said.

“When the headline PMI was last at a similar level (in October 2014 and January 2015) the survey showed solid growth in private sector jobs, which is not the case this time.”

The employment sub-index nudged down to 50.1, however, with non-oil companies still showing reluctance to hire additional staff.

The UAE economy grew about 1.7 percent in 2018, slower than projected despite a boost from higher oil prices, preliminary data showed in March. The economy is projected to grow 3.5 percent in 2019, helped by strong non-oil activity, the central bank said in a quarterly report.

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Saudi Arabia most improved economy for business

Time: May 28, 2019  

IMD’s chief economist noted the efficiency of public-sector finance and the stability of Saudi Arabia’s tax regime as factors in the improved ranking. (Reuters)
  • The Kingdom rose 13 places in the latest edition of IMD’s annual survey, jumping to 26th in the world
  • IMD’s Christos Cabolis: Saudi Arabia spends 8.8 percent of its gross domestic product on education, against a global average of 4.6 percent

DUBAI: Business competitiveness in Saudi Arabia has improved more than any other country in the world, according to a new survey by Switzerland-based business school and think tank the International Institute for Management Development (IMD).
The Kingdom rose 13 places in the latest edition of the annual survey, jumping to 26th in the world. IMD highlighted Saudi investment in education, where the country achieved the highest ranking in the world, as well as the quality of public and business finance, as factors behind the improvement.
Christos Cabolis, chief economist and head of operations at IMD’s World Competitiveness Center, said the Kingdom invested nearly double the global average on education. “Saudi Arabia spends 8.8 percent of its gross domestic product on education, against a global average of 4.6 percent.”
He also noted the efficiency of public-sector finance and the stability of Saudi Arabia’s tax regime as factors in the improved ranking. “The message is to keep up the good reforms and attempt to be more transparent.”
The UAE was the highest-ranked regional performer in the survey, becoming the first Middle East country to break into the top five, with particular praise for its business efficiency.
Cabolis said that the improvement for both Saudi Arabia and the UAE came despite challenges in the economic performance of their oil-dominated economies. But non-oil exporters in the Middle East, such as Turkey and Jordan, suffered because of inflationary and other fiscal challenges.
Singapore emerged as the most competitive economy in the world, replacing the third-placed US, last year’s top economy. Hong Kong was ranked second.
“Singapore’s rise to the top was driven by its advanced technological infrastructure, the availability of skilled labor, favorable immigration laws, and efficient ways to set up new businesses. Hong Kong SAR held on to second place, helped by a benign tax and business environment and access to business finance,” IMD said.
“The initial boost to confidence from President Donald Trump’s first wave of tax policies appears to have faded in the US, according to the ranking. While still setting the pace globally for levels of infrastructure and economic performance, the competitiveness of the world’s biggest economy was hit by higher fuel prices, weaker hi-tech exports and fluctuations in the value of the dollar,” it added.
Ireland rose five places to rank 7th, while the UK — partly as a result of Brexit uncertainty — slipped to 23rd. In Saudi Arabia, Cabolis said that the strategy of economic diversification under the Vision 2030 plan was “slow but noticeable” and had contributed to the Kingdom’s rise.
However, the Kingdom performed comparatively poorly in some categories, notably international trade, technology and infrastructure, health and environment.
Challenges remain for Saudi competitiveness, IMD said. Policymakers have to continue government efforts to boost the non-oil economy, as well as to increase employment opportunities for young Saudi men and women under the human capability development program.
They should also continue reforms to restructure and streamline procedures and fees for licensing activities, and increase efforts to attract foreign direct investment.
“Economists regard competitiveness as vital for the long-term health of a country’s economy as it empowers businesses to achieve sustainable growth, generate jobs and, ultimately, enhance the welfare of citizens,” IMD said.

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