Saudi Arabia's economy is recovering at an upbeat pace. The kingdom responded to the COVID-19 pandemic with strong policy buffers ranging from fiscal, financial, and employment support programs that helped ease the impact of the pandemic throughout various sectors.
The government has adjusted the policies to a more targeted approach and withdrew some of the accommodative clauses as the pandemic gradually recovered.
The country's non-oil sectors had experienced unprecedented growth since the second half of 2020 and are expected to continue their progress at a 4.3 percent growth rate this year. The number would supposedly be driven by the rigorous public investment funds and recovering private demand.
In contrast, the real oil GDP growth - which has been the country's backbone in the past decades - expects to grow at -0.4 percent as production adheres to the OPEC+ agreement.
Saudi Arabia's most significant threat lies in the drag of the central government's fiscal consolidation. 2020 saw the fiscal deficit widened to 11.3 percent of the GDP, primarily due to the decline in oil revenues.
While non-oil revenues have been showing a cheerful nuance, other factors such as the subtle movement of expenditure and weak capital spending caused by COVID-19 related reasons pose challenges that the kingdom needs to address.
Problems aside, Saudi Arabia's inflation expects to remain stable at a 3.2 percent rate, supported by the strong sentiment within private sector credits and programs encouraging mortgage, as well as small-to-medium-enterprises lending regulated by the central bank.
Furthermore, the growing female labor market and measures to invite expatriate workers would help the country boost productivity and household incomes.
Saudi central bank plays an essential role in paving the kingdom's building blocks towards its goals. With well-thought-out supervision on mortgage lending and regular assessments in payments programs, the country is creating a global quality of capital market reforms and regulatory frameworks.
Moreover, Saudi Arabia commits to continue establishing more structural reforms for economy diversification, sustainable and thorough growth and implementing ambitious investment strategies throughout the nation.
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