São Paulo – Saudi Arabia needs to control expenses to avoid inflation spiralling out of control, recommends the International Monetary Fund (IMF) after evaluating the country’s figures in early July. On the other hand, according to a report disclosed by the institution on Tuesday (7), Fund directors praised conduction of the economic policy of the country during the international crisis that mainly affected the Euro zone and during the conflicts between rebels and governments of neighbouring Arab nations.
Preliminary information on the Saudi economy regarding 2011 show that the country’s Gross Domestic Product (GDP) grew 7.1% and should rise 6% this year. The GDP of the non-oil sector grew more than that of the oil sector in 2011: 8%.
The performance of the Saudi economy in 2011 was boosted by the growth of expenses promoted by the government. Production of oil also rose to exceed demand and avoid higher commodity prices. Other producer countries, like Libya, had production interrupted during Arab Spring protests.
The Saudi government also adopted, in 2011, measures to contain social pressures within the country. Some of these measures were the construction of houses, reduction of unemployment and the financing of small and medium enterprises. These actions, according to the IMF, resulted in growth of 20% in government spending. Inflation was 5%, below the 5.4% of 2010. The forecast for 2012 is growth of 5.2% in prices. To contain the greater inflation, directors at the Fund recommend that authorities contain spending.
“The executive directors welcomed the authorities’ efforts to stabilize oil markets and noted the positive spillover to the region from Saudi Arabia’s higher growth, public spending, and expanded financial assistance. Higher oil revenues have strengthened fiscal and external balances and have boosted social spending and savings for future generations. The near-term economic outlook is broadly favourable, although geopolitical risks and oil prices remain sources of volatility,” pointed out the IMF representatives.
*Translated by Mark Ament
