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Oil price responsible for lower growth of Saudi GDP

Staff writer ▼ | August 19, 2015
The Gross Domestic Product (GDP) of Saudi Arabia should grow less this year and in 2016 due to the fall in revenues with the country’s main economic activity: oil exploration.
Saudi Arabia oil
Estimation   The International Monetary Fund
According to a document about the performance of the Saudi economy by the International Monetary Fund (IMF), the GDP should increase 2.8% this year and 2.4% in 2016. Last year, it grew 3.5%.

The report released by the IMF is the result of an assessment of the country’s economy concluded on July 29.

According to this document, Saudi Arabia enjoyed a strong growth in the last few years due to the production and high prices of oil. This scenario, however, changed since 2014, when the prices of the commodity dropped almost 50%.

Because of this new price level of oil, the IMF forecasts a slowdown in the GDP’s growth. This year’s fiscal deficit should account to 19.5% of the GDP and the current account deficit should turn into a surplus already in 2016.

The IMF points out that despite lower revenues with oil exports, Saudi Arabia has a low level of indebtedness and that despite the drop in deposits, the Saudi banks are able to withstand lower growth and revenues.

“The decline in oil prices has increased the importance of structural reforms to switch the focus of growth away from the public sector and toward the private sector”, says the document.

Besides lower oil revenues, the IMF points out that regional tensions offer risks to the country’s growth.

The Fund commended Saudi Arabia’s efforts to promote actions to open job posts and to diversify the economy.

Among them, it cited the government’s effort to strengthen the business environment, develop infrastructure, increase employment opportunities for women and invest in education and training.