Saudi Central Bank outlines COVID-19 strategy to IMF

When it comes to GCC, Saudi Arabia and the UAE are the shining lights — both having rolled out successful vaccination programs for their populations

  
Kingdom Centre, Riyadh, Saudi Arabia. Image used for illustrative purpose.

Kingdom Centre, Riyadh, Saudi Arabia. Image used for illustrative purpose.

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BERN: The International Monetary Fund (IMF) published its updated growth forecasts for the next five years in time for the World Bank and IMF Spring meetings, which are taking place this week. Things look better than anticipated than they did six months ago, or even in January, when the IMF provided its latest update.

The world economy is expected to grow 6 percent, compared to 5.5 percent projected in January, with China and the US providing the lion’s share. The Middle East and Central Asia stand at 3.7 and 3.8 growth rates for 2021 and 2022.

These numbers are important, because they tell us that after the biggest slump in economic activity since the great depression, there is light at the end of the tunnel. However, this mainly applies to countries, which have the means to immunize their people against the coronavirus disease (COVID-19).

When it comes to GCC, Saudi Arabia and the UAE are the shining lights — both having rolled out successful vaccination programs for their populations. The Kingdom is expected to grow at 2.9 percent in 2021 and 4 percent in 2022.

In an interview with Jahad Azour, director of the IMF’s Central Asia and Middle East department, Fahad Almubarak, governor of the Saudi Central Bank, outlined how Saudi Arabia achieved the positive outlook by applying necessary measures during the pandemic.

The governor pointed out that several Saudi government programs cushioned the pandemic’s blow to the economy by supporting small and medium-sized enterprises (SMEs) with $74 billion in terms of deferred loan payments and loan extension guarantees, as well as cash injections worth $13 billion to those companies.

“Where are the maximum risks in our economic sector? We found that SMEs are the most impacted. Therefore, we started several programs,” Almubarak said in the interview with the IMF. “One of them is we asked the banks to defer payments due by the SMEs. (An) additional program is guaranteeing finance. The central bank, along with other government entities, we would help SMEs by guaranteeing their loans for them to be able to sustain the temporary situation.”

Shrewd macro-prudential management and appropriate support of the SME sectors will ensure that the Kingdom emerges relatively unscathed from the pandemic induced 2020 annus horribilis.

In this context, we have to pay tribute to OPEC+, which effectively managed the supply and demand picture for oil. A stable and predictable outlook on oil prices, which is achieved with forward-looking and prudent supply management by OPEC+, remains the silver bullet in terms of how the global investor community looks at GCC economies. All in all, the macroeconomic outlook for the global economy as forecasted by the IMF looks better than only three months ago.

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