Saudi Arabia’s economy has grown very strongly in recent years as it has benefited from high oil prices and output, strong private sector activity, increased government spending, and the implementation of a number of domestic reform initiatives. Rising oil prices and oil production have also resulted in large external and fiscal surpluses, and government debt has declined to very low levels.
The economic outlook remains favorable. Nevertheless, the substantial drop in oil prices since the summer of 2014 is an important risk to the outlook. The Saudi Arabian economy remains very dependent on oil revenues to support growth and fiscal and external balances — over90 percent of fiscal revenues and 80 percent of export revenues come from the sale of oil. Developments in the global oil market are therefore central to the economic outlook. Lower oil prices will have an immediate negative effect on the fiscal and external balances, and over time will also likely lead to slower growth.
The reliance of the Saudi Arabian economy on oil revenues raises two key challenges for policymakers. The first is how they should best manage the country’s current heavy dependence on oil revenues and ensure that the domestic economy is insulated to the extent possible from volatility in the global oil market. The second is how they can help the economy to diversify so that the current reliance on oil revenues is reduced over time.
In this report, the International Monetary Fund addresses important challenges for Saudi Arabia. They look at the global oil market and it's implications for Saudi Arabia, fiscal as well as monetary policies to sustain economic growth and at economic diversification. Please find the full report attached on the left.