São Paulo – The International Monetary Fund (IMF) recommended that Saudi Arabia not stop fighting inflation. In a report disclosed on Tuesday (23), the institution praised the social advances obtained by the country in recent years, but observed that the high levels of government spending and the value of imported food may cause prices to rise inordinately.
The IMF stated that in 2011 inflation in Saudi Arabia should be 6%. In 2010, the level was 5.4% and, in 2009, the year of recovery from the economic crisis, 5.1%. In 2008, price increases reached 9.9%. In the report disclosed today, the IMF directors stated that inflation in the country “has been subdued”. But it alerts that the combination of continued price pressure, the expansion of government spending, domestic liquidity and rents may result in greater inflation.
The IMF report shows that Saudi Arabia needs to face some economic challenges. Among them, the high unemployment rate among youths. “With oil prices having rebounded following the global financial crisis, strong fiscal and external balances, coupled with high international reserves and very low debt, Saudi Arabia has the fiscal space to address these social priorities,” suggests the study.
The Fund also praised the economic policies of Saudi authorities. It recalls that the country grew 4.1% in 2010, against growth of 0.1% in 2009, and forecasts that this year the country’s Gross Domestic Product (GDP) will grow 6.5% as against 2010. The institution says that improvement in economic indices benefits oil and non-oil sectors, and stated that in 2010 listed company profits were 56% greater than in 2009.
“[IMF] Executive Directors noted that policy and financial buffers, combined with prudent financial sector regulation and supervision, had allowed Saudi Arabia to weather the global slowdown well,” says the IMF.
This study concludes the meetings that took place between Fund economists and country authorities. The research is developed according to Article IV of the IMF’s Articles of Agreement and includes all nations that are members of the institution. The report was concluded on July 18th.
*Translated by Mark Ament
