Saudi Arabia’s current account is projected to move back into surplus in 2017 after recording massive deficits due to lower oil prices in the past two years, the IMF said in a statement released today following the completion of its annual Article IV consultation with the kingdom.
The IMF said the surplus will total $1.3bn, equivalent to 0.2 per cent of GDP, this year. This compares with a deficit of $25bn in 2016 and $57bn in 2015.
The kingdom was expected to record another big deficit in 2017. The surplus was largely due to merchandise imports in both 2016 and 2017 being significantly lower than previously forecast and lower remittances by foreign workers.
The IMF said the government’s budget deficit is expected to fall to 9.3 per cent of GDP in 2017 from 17.2 per cent in 2016. It forecast that the deficit will continue to decline to under 1 per cent in 2022.
This reflects the signs the Saudi government has abandoned the goal of balancing the budget in 2020.
“The authorities have made considerable progress in initiating the implementation of their ambitious reform agenda,” the IMF said. “Fiscal consolidation efforts are beginning to bear fruit, progress with reforms to improve the business environment are gaining momentum, and a framework to increase the transparency and accountability of government is largely in place.”
The IMF says it has emphasised the importance of establishing and efficient and effective tax system. The kingdom’s introduced taxes on tobacco and soft drinks and plans to introduce VAT next year.
IMF said unemployment among Saudi Arabian nationals was now 12.3 per cent.