IMF expects Saudi economy to grow by 2.8% in 2021

New forecast upgrades on the 2.4% growth prediction from the previous report

Riyadh, Saudi Arabia. Image used for illustrative purpose.

Riyadh, Saudi Arabia. Image used for illustrative purpose.

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RIYADH/CAIRO - The International Monetary Fund expects the Saudi economy to grow by 2.8 percent in 2021 and 4.8 percent in 2022, it said today in its annual World Economic Outlook.

The new 2021 growth forecast for the Kingdom upgrades on the 2.4 percent growth prediction from the previous report, issued in July. 

However, the 2022 growth forecast remained unchanged.

The 2021 forecast for the MENA region stays at 4.1 percent, but the IMF’s 2022 growth prediction rose by 0.4 percent to 4.1 percent.

Upward revisions in growth forecasts for emerging markets and developing economies (which includes MENA) were attributed to favorable assessments of some commodity exporters and a “stronger-than-anticipated domestic demand” in regional economies. This outweighed the adverse developments of the pandemic.

The IMF also predicts consumer prices to increase by 12.7 percent in 2021 and 8.6 percent in 2022 for the MENA region. The inflation increase is fueled by hikes in food prices due to local shortages and jumps in global food prices.

However, the Kingdom’s inflation rate for 2021 is expected to be a much-lower 1.6 percent while the price increase in 2022 is projected to be moderately higher, rising by 2.2 percent.

For the US, the world’s largest economy, the IMF predicts growth of 6 percent for 2021, below its July forecast of 7 percent. The downward revision reflects a slowdown in economic activity resulting from a rise in COVID-19 cases and delayed production caused by supply shortages and a resulting acceleration of inflation.

The IMF predicts that for the world’s advanced economies as a whole, growth will amount to 5.2 percent this year, compared with a meager predicted gain of 3 percent for low-income developing countries.

“The dangerous divergence in economic prospects across countries,” the IMF said, “remains a major concern.”

The monetary fund expects the total output from advanced economies to recoup the losses they suffered during the pandemic by 2022 and to exceed their pre-pandemic growth path by 2024.

But in emerging and developing countries outside of China, the IMF warns, output will remain an estimated 5.5 percent below the output growth path that the IMF had been forecasting before the pandemic struck in March of last year. That downgrade poses a serious threat to living standards in those countries, the monetary fund said.

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