RIYADH: Saudi Arabia’s economy can achieve growth of 4.4 percent in 2014, in line with a forecast by the International Monetary Fund, the governor of Saudi Arabian Monetary Agency (SAMA) said.
“We see that the private sector will be the main growth driver this year. Government investments continue to be the main driver for private sector growth, so I am optimistic,” said Fahad Al-Mubarak.
“I do not see high risks in specific areas.”
The country’s economic growth slowed to 3.8 percent in 2013 from 5.8 percent in the previous year as oil output, which accounts for nearly half of overall gross domestic product, fell after a robust increase in 2012.
Actual government budget spending rose by a modest 6 percent in 2012 and by the same rate in 2013 after a jump of over 26 percent in 2011.
A Reuters poll of analysts in January this year predicted that inflation-adjusted GDP would expand 4.2 percent in 2014 and 4.3 pct in 2015.
Inflation in Kingdom is forecast at 3.0 percent this year by the IMF, Al-Mubarak also said, citing the IMF’s latest available prediction.
“I expect this will be reasonable. Results for the first few months of the year are less than 3 percent.”
Consumer price growth eased to 2.8 percent year-on-year in February, the lowest level since September 2012 when the statistics office launched its new rebased price index.
Al-Mubarak said Saudi Arabia’s current central bank policy rates are reasonable and balanced, and tapering of the US Federal Reserve’s bond purchases is unlikely to affect the Kingdom’s monetary policy direction.
“Our policy rate, I think it is reasonable and balanced and it will achieve our policy objective given our fiscal situation,” he said at the annual news conference.
“In terms of QE (quantitative easing), we were not affected much by its implementation in the first place. Now, that is being withdrawn, we don’t have to see an effect on our monetary policy or our banking system.”
Saudi Arabia, which pegs its riyal currency SAR= to the US dollar, has kept its repo rate at 2.0 percent since January 2009 and its reverse repo rate at 0.25 percent since June 2009, after a series of cuts that followed the 2008 global financial crisis.
Asked whether he was concerned about the sustainability of Saudi Arabia’s public finances in coming years following large spending increases in the past, Al-Mubarak said:
“In the last three years we had an expansionary budget but we were able to achieve surpluses. Going forward and given (the) forecast – actually (the) Reuters forecast for oil indicates that the rate is reasonable, and it will provide the government with a reasonable revenue going forward.”