The International Monetary Fund expects Saudi Arabia's oil gross domestic product (GDP) to fall by 1.9 percent this year as the OPEC leader commits to implementing the bloc's production cuts.
The oil production cuts are affecting overall real GDP growth as well, which the IMP expects to be "close to zero".
Non-oil GDP growth will hover around 1.7 percent and accelerate in the medium term as structural reforms promised in the Vision 2030 agenda began to take shape.
"Fiscal consolidation efforts are beginning to bear fruit, progress with reforms to improve the business environment are gaining momentum, and a framework to increase the transparency and accountability of government is largely in place," the IMF report read.
"Effective prioritization, sequencing, and coordination of the reforms is essential, and they need to be well-communicated and equitable to gain social buy-in and ensure their success."
The success of Crown Prince Mohammed bin Salman's Vision 2030 plan depends on profits from the Saudi Aramco initial public offering, scheduled to take place early next year. Reports indicate that authorities would prefer a $60 barrel at the time of the IPO, which will be the largest event of its kind in financial history. Despite the KSA's efforts over the past year to reduce the global supply glut via an OPEC quota system and partnerships with non-OPEC nations, oil prices remain below $50 a barrel.
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American shale producers, as well as Libya and Nigeria, have brought hundreds of thousands of barrels of production online since the beginning of 2017, counteracting the 1.2 million-barrel cut by OPEC nations. The African duo had been granted exemptions from OPEC production quotas due to the effects of long-term domestic strife on their economies.
Riyadh plans to use the profits from selling five percent of Aramco to fund the economic overhaul envisioned in its development plan. The vision includes the "Saudization" of the kingdom's workforce and a shift towards non-oil commodities and the services sector.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on… More
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