The kingdom will probably see a deficit of 0.1% of gross domestic product this year and 1.1% in 2025, according to the Washington-based lender’s so-called Article IV review of the Saudi economy. The IMF expects an average shortfall of 2.9% from 2026-2029.
That would mark a significant turn around from 2022, when crude soared to almost US$130 a barrel after Russia’s invasion of Ukraine and Saudi Arabia’s current account surplus was almost 14% of GDP.
Prices have since fallen, in recent months because of concerns about the state of the US and China’s economies. This week, Brent has slumped more than 7% to around US$73 a barrel, far below what the kingdom needs to balance its budget.
“If oil production were to decrease and export proceeds were to decrease consequently, then we would have a current account balance that would be significantly lower,” Amine Mati, mission chief for Saudi Arabia, said in an interview with Bloomberg Television on Wednesday.
Even so, the kingdom has enough foreign reserves to cover the shortage and the economy is still well balanced, the IMF says.
More broadly, the IMF said Saudi Arabia’s economic outlook is strong and non-oil growth is robust. Unemployment is at record lows and inflation in the country, which pegs its currency to the US dollar, is contained.
A recalibration of spending priorities when it comes to projects supporting Crown Prince Mohammed bin Salman’s Vision 2030 plan to diversify the economy from oil should help ease pressure on fiscal and external balances, the IMF added.
It recommended Saudi Arabia consider introducing taxes, including on property and income, to boost non-oil revenues and help further alleviate some of the strain from falling oil revenues.
“There is quite a bit of room on a number of taxes,” Mati said. “Property taxes are non existent. If you compare to other advanced economies, that could bring you an additional 2% of GDP.”
The IMF sees Saudi Arabia’s US$1.1 trillion economy growing 1.7% this year and 4.7% in 2025, assuming oil production cuts are gradually phased out from October.
GDP shrank 0.4% on an annual basis in the second quarter but is expected to return to growth of almost 4% in the current period, according to forecasts compiled by Bloomberg.
A key question is how the latest weakness in global oil markets — and what it may mean for Opec+ supply policy — may affect the broader outlook. The cartel, led by the Saudis and Russia, is considering delaying the plans to raise output later this year, Bloomberg reported on Wednesday.
The IMF estimates Saudi Arabia needs oil prices at US$96 a barrel to balance its budget this year, more than US$20 higher than current levels. Bloomberg Economics puts the break-even at US$109, once domestic spending by the kingdom’s sovereign wealth fund is taken into account.
The Public Investment Fund raised US$2 billion of bonds on Tuesday, taking its total issuance this year to almost US$10 billion. If oil prices don’t rise, it’s likely to sell even more bonds in future to help finance its investment plans in the kingdom, Morgan Stanley analysts say.