The International Monetary Fund (IMF) estimates that Saudi Arabia’s economic growth in 2019 may be slightly higher than its earlier 1.8 per cent forecast as the non-oil sector is expanding faster than the wider economy, a senior official said.

The budget deficit this year could be 7.9 per cent, higher than 2018 on an assumption that oil prices would be lower in 2019 compared to last year, Jihad Azour, director of the Middle East and Central Asia Department at the IMF, told Reuters.

“We expect non-oil growth to be at 2.6 per cent this year and 2.9 percent for 2020,” he said.

“Based on the early assessment of the (IMF) team, we think there are upside risks, i.e. growth could be slightly higher than the one we have in our projections,” Azour said.

Earlier, Saudi central bank governor Ahmed Al Kholifey told Reuters last week that Saudi economic growth in 2019 would be “no less than 2 per cent”.

The Saudi economy grew by 2.2 per cent last year, recovering from a contraction in 2017.

Azour said an IMF team was now on the ground in Saudi Arabia and revised economic numbers were expected this week.

The IMF’s projection for the Saudi budget deficit in 2019 is based on the assumption that oil prices will remain in the mid-$60 per barrel range this year, he said.

Saudi Arabia had estimated a budget deficit of 4.6 per cent of gross domestic product in 2018 and its budget for 2019 forecast a deficit of 4.2 per cent of GDP.

Saudi Finance Minister Mohammed Al Jadaan said the kingdom recorded a budget surplus of 27.8 billion riyals ($7.4 billion) in the January-March period, its first since oil prices plunged in 2014.

“The decline in oil price and the volatility we saw in the market are leading to an expected deficit of 7.9 percent,” Azour said. “We expect the situation to improve in 2020 to 5.7 per cent.”

DOMESTIC DEMAND BUOYS

Saudi Arabia’s non-oil private sector ended the opening quarter of the year on a stronger footing, buoyed by signs of improving domestic demand, said the latest Emirates NBD Saudi Arabia PMI survey.

Inflows of new work rose the most in almost four years in March, leading to stronger growth in business activity. However, with capacity pressures remaining muted, employment fell slightly and for first time in five years.

The main findings of the March survey were as follows: new order growth accelerates to fastest since April 2015; employment edges lower amid lack of capacity pressures; and output prices fall slightly for fifth month running.

March saw the rate of new business growth accelerate for the fifth time in the past six months to the highest since April 2015. Surveyed firms reported that the upturn largely reflected stronger market conditions, with greater sales efforts, improving product offerings and pricing also helping to attract customers.

New export orders rose for the first time in three months but only marginally, indicating that the main impetus continued to come from domestic sources. The output of goods and services across the non-oil private sector likewise increased at a faster rate in March. Growth in output was at a seven-month high, though still below the historical series average
(since 2009).

Finally, confidence towards future output remained strongly positive, despite the degree of optimism easing from January’s recent peak.
 

EASTERN PROVINCE FIRMS UP 24PC

COMPANIES and establishments in Saudi Arabia’s Eastern Province have recorded a growth of 24 per cent over the past three years, thanks to the reforms as well as improvement in the business environment and business procedure, according to the Minister of Commerce and Investment Majed Al Qasabi.

Majed Al Qasabi

The Minister made the remarks during an interaction with businessmen, businesswomen and entrepreneurs from the Eastern Province on the sidelines of the Eastern Biban Forum.

Qasabi said the number of commercial registrations issued for a total of 29,869 companies rose by 24 per cent to 181,086 during last three years.

He said that the Cabinet’s approval for the Guide and Organisation Chart of the Ministry of Commerce and Investment came after 15 years of the approval of the previous organisational structure.

Qasabi affirmed that the new organisation chart would contribute in achieving the ministry’s strategy and objectives, as well as it will go in line with the Kingdom’s Vision 2030.

He said the new organisation chart will be based on quick technical solutions and smart business. “It gives the customer services great attention, besides setting up and developing performance indicator measurement, and raising the performance and service quality of the ministry’s branches in all regions of the kingdom. The new chart will establish a special deputy ministry for customer services, covering all branches.”

Meanwhile, the Eastern Province Chamber of Commerce and Industry and the General Authority for Small and Medium Enterprises (Monsha’at) signed a cooperation agreement in Dammam. It aims to promote a culture of entrepreneurship and assist the development of SMEs to help increase their contribution to the Saudi economy.

The agreement was signed in the presence of Eastern Province Gov Prince Saud bin Naif. It forms part of the chamber’s efforts to support and develop SMEs through training programmes and specialised forums and other activities.