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Saudi Arabia's banks remain liquid, well-capitalised, and their profitability — which declined during COVID — rebounded strongly in 2021 as net interest margins recovered, said IMF. Pic: iStock

Saudi to outpace China, India to become fastest-growing economy: Report

The Gulf country will outpace China, India, Indonesia, South Korea and Taiwan, grow faster than the struggling major economies in western Europe and North America, and leave behind other large emerging economies in its wake, said an EIU report


Saudi Arabia is expected to grow at its fastest pace in a decade and will be the fastest growing of the world’s largest economies in 2022.

The country will outpace China, India, Indonesia, South Korea and Taiwan, grow much faster than the struggling major economies in western Europe and North America, and leave other large emerging economies in its wake, EIU, the research and analysis division of The Economist Group, said in a report.

It added that real GDP growth is expected to reach 7.5% in 2022, which would be Saudi Arabia’s fastest rate of growth since 2011 and place it at the top of the economic growth chart for the world’s 20 largest economies (measured in US dollars at purchasing power parity). Saudi Arabian real GDP growth will be close to a solid 5% in 2023 before slipping back to reasonably strong growth of about 3% in 2024‑26.

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The International Monetary Fund (IMF) too said that Saudi Arabia is likely to be one of the world’s fastest-growing economies this year as sweeping pro-business reforms and a sharp rise in oil prices and production power recovery from a­ pandemic-induced recession in 2020.

Saudi Arabia economy
Source: EIU

Gross domestic product is expected to expand by 7.6%, the fastest growth in almost a decade, according to IMF’s recent Article IV consultation report.

Despite higher prices for imported commodities, inflation will remain contained at 2.8% in 2022 as the central bank tightens policy in line with the US Federal Reserve. Public finances and the external position will strengthen substantially thanks to increased non-oil revenue and higher proceeds from oil exports. Reserve buffers will remain ample, the IMF said.

In its consultation report, IMF noted, “Saudi Arabia is recovering strongly following a deep pandemic-induced recession. Liquidity and fiscal support, reform momentum under Vision 2030, and high oil prices and production helped the economy recover with a robust growth, contained inflation and a resilient financial sector. The receding effects of the pandemic, rising oil production/prices and a strengthening economy have improved the fiscal and external positions.”

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Overall growth was robust at 3.2% in 2021, in particular driven by a rebounding non-oil sector — supported by higher employment for Saudi nationals, particularly women — and is expected to increase significantly to 7.6% in 2022 despite monetary policy tightening and fiscal consolidation, and a, thus far, limited fall-out from the war in Ukraine. Over the medium term, growth is expected to accelerate as continued implementation of the reform agenda and the National Investment Strategy, supported by Public Investment Fund interventions, yields dividends, IMF said.

Saudi Arabia economy
Source: EIU

Inflation remained contained at 3.1% in 2021 as the base effect of the mid-2020 VAT hike dissipated coupled with a low passthrough of international food and commodity prices. The low passthrough is expected to help contain inflation at 2.8% in 2022, despite some inflationary pressures expected from double-digit wholesale price inflation and increasing shipping costs.

Banks remain liquid, well-capitalised, and their profitability — which declined during the COVID-19 pandemic — rebounded strongly in 2021 as net interest margins recovered. Credit to the private sector expanded by 15.4 per cent in 2021, mainly driven by mortgages and SME lending. Saudi financial markets surged earlier this year, albeit most of this surge was reversed over the past two months in line with recent global developments, IMF said.

Saudi Arabia economy
Source: IMF

The overall fiscal balance increased by almost 9 percentage points of GDP to a 2.3 percent of GDP deficit in 2021, mainly reflecting oil revenues and non-oil tax revenues supported by a rebounding economy and the full-year effect of the tripling of the VAT rate to 15% in mid-2020.

Higher oil prices and stepped-up oil production improved the current account by 8.5 percentage points in 2021, registering a surplus of 5.3% of GDP as strong oil-driven exports surpassed growing imports and large remittance outflows. While reserves increased, net foreign assets declined, although remaining at very comfortable levels at 22 months of imports in 2021 and are expected in increase significantly in the wake of rising oil export revenues over the medium term.

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