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The International Monetary Fund expects Saudi Arabia’s economy to grow by 1.6 percent this year and 2.2 percent in 2019 thanks to higher oil prices, the authority said in the latest edition of its World Economic Outlook. Higher oil prices will help lift the growth prospects of the whole region, although, the IMF said, “the fiscal adjustment that is still needed is projected to weigh on growth prospects.”
The Kingdom’s economy contracted by 0.5 percent last year, but Riyadh is upbeat about the future: in December the government approved its highest-ever annual budget, at some US$261 billion. Riyadh also eyes reducing the share of oil revenues as part of the total to less than 50 percent. That would be a huge reduction given that oil accounted for more than 90 percent of revenues just three years ago. Now, oil revenues are about two-thirds of the total.
The IMF’s outlook revision comes as Saudi Arabia and Russia discuss their exit strategy for the oil production cut that helped drain global oversupply by removing almost 1.8 million bpd from total daily production. For now, the two leaders in the agreement seem to have decided to keep the framework of the agreement untouched, but this does not mean that the cuts will remain beyond the December 2018 deadline, Saudi Arabia’s Energy Minister said at a joint interview with Novak for Bloomberg.
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The framework, they said, will remain, and if at some point it becomes necessary to intervene, the mechanism to do so will be there.
At the same time, Saudi Arabia sees oil revenues soaring by 80 percent over the next six years, according to unnamed sources that spoke to Bloomberg in December. The information is not public yet, but plans are for the Kingdom to increase its output to a level that, combined with an assumption of higher oil prices, will allow Riyadh to book its first budget surplus since 2013.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.