IMF expects "modest recovery" for Saudi non-oil sector

WASHINGTON, Jan 18 (KUNA) -- The International Monetary Fund (IMF) on Wednesday expected Saudi Arabia's non-oil sector to witness a "modest recovery" in 2017 due to increased confidence and less fiscal consolidation.
"The non-oil sector we expect to grow, we downgraded that marginally, but we do expect a modest recovery in non-oil growth this year," Assistant Director and Mission Chief for Saudi Arabia Tim Callen told a press conference at the Washington-based IMF.
"That is because we've seen confidence rebound a little bit in recent months after the sovereign bond issue. The government has been now paying the delayed payments, so that I think this has been positive for confidence," he said.
"We are also expecting a little bit less of a fiscal consolidation this year than over the previous two years," he said in remarks discussing Saudi Arabia's key economic developments.
After the IMF World Economic Outlook report decreased its growth forecast for the country, Callen said this is due to the cut in oil output per the OPEC agreement, and an assumed contraction in oil GDP in 2017 as a result.
About Saudi Arabia's budget and the fiscal balance program, he said this "substantially increased the transparency of fiscal policy." "This should really help the private sector in terms of understanding what the government's fiscal reform plans are," he said, "and therefore this should boost investor confidence and private business confidence." On the monetary side, the Saudi Arabian Monetary Agency "has continued to respond to the tightening of liquidity that had been seen in the domestic market." "All of these factors have been behind the decline in interbank interest rates that we've seen over the last couple of months," he added.
Furthermore, he said capital market reforms assumed by the Saudi Capital Markets Authority are an "important area where reforms can certainly help in terms of raising options for private sector finance, and increasing the range of options that savers in the domestic economy have." (end) sd.gb