Saudi Arabia’s budget will achieve more financial revenues following a production cut announced by the Kingdom with OPEC and its allies, according to the International Monetary Fund (IMF), thanks to higher crude prices.
“The impact on the budget and on the external position relative to what we had projected is positive,” Amine Mati, the IMF mission chief to Saudi Arabia, said in an interview in Washington, as reported by Bloomberg.
“So the price impact would offset the loss that could arise from the production,” he added.
IMF experts had pointed to expectations that oil prices would decline by about 17.3 percent in 2023, with an assumed average price per barrel, based on futures markets, at $73.13 in 2023 and $68.90 in 2024, compared to $96.36 in 2022.
The decision of Saudi Arabia and other oil countries to reduce production has moved the global markets, especially as it followed the global banking crisis in the United States and Europe, which contributed to the decline in futures prices in mid-March.
However, the producers’ announcement to cut 1.1 million barrels per day, in addition to Russia’s decision to trim oil production by 500,000 barrels per day until the end of 2023, strengthened price stability.
The IMF estimates predicted performance for the current and next year at a slower-than-expected rate of 3.1 percent in 2023 and 2024, which is much lower than its previous expectations of the growth of the Kingdom’s economy at about 9 percent.
While Saudi Arabia’s economic growth rate may suffer from lower crude production, the cuts won’t affect its non-oil expansion “because that’s going to be driven by domestic demand,” Mati said, according to Bloomberg.
“At least in the short term, we don’t see a disruption in the spending pattern at the central government budget. And on the economy as a whole, we see some of the investment in the private sector driving the growth,” he added.
Saudi Arabia’s General Authority for Statistics (GASTAT) recently revealed that the Kingdom’s economy grew by 8.7 percent over the past year.
