Saudi Arabia’s wide-scale economic reforms, including its plan to build a $500 billion megacity (NEOM) are a step towards the right direction, Jihad Azour, the International Monetary Fund’s (IMF) Middle East and North Africa director told Argaam.
“The strategy of Saudi Arabia to diversify the economy by focusing on a long-term investment strategy that will allow sectors to grow or the economy to grow beyond oil, I think it was in the right direction,” he said.
At a Foreign Investment Initiative in Riyadh last week, Crown Prince Mohammed bin Salman revealed his vison for NEOM in front of over 2,000 investors and global decision makers.
Overall, while many changes are taking place in the region, the pace of reform needs to increase, Azour said at a conference in Dubai.
"Countries like Saudi Arabia have a lot of buffer, compared to countries like Oman and Bahrain, and therefore they can in fact manage this at a different pace," he added.
The IMF launched its latest Regional Economic Outlook report on Tuesday, in which it expects growth in the Gulf region to ease to its lowest level at 0.5 percent this year, citing OPEC production cuts. Non-oil growth in the Gulf is forecast to recover to 2.6 percent and 2.4 percent in 2017 and 2018, respectively, amid a slowdown in financial regulation.
The fund also maintained its medium-term estimates on oil prices at $53 a barrel.
Meanwhile, Azour added that the change in oil prices over the past six to nine months does not provide strong indicators to change the fund’s outlook for prices.
“The fact that the oil didn’t recover as fast as the other economic indicators, while OPEC maintained the cut in oil production, doesn’t show that there is a need today to change the outlook,” Azour said, on the sidelines of the conference.
He added that the outlook on oil prices is always subject to revision.
Crude oil prices have been on the rise supported by statements from Saudi Arabia and Russia in favor of a possible extension to the OPEC-led oil output deal, which expires in March 2018.
Global benchmark Brent crude crossed the $60-mark last week and has held steady at the level. Brent was last trading up 0.1 percent at $60.96 per barrel – the highest in past two years, and more than 35 percent above this year’s low reached in June.
Elsewhere, Azour added that creating jobs for young people in the region should also be a priorirty.
"As we see here, the level of youth unemployment in MENA is higher than average energy market and higher than other developing countries," he said. "We need over the next five years at least 25 million new jobs."
Write to Nadeshda Zareen at nadeshda.zareen@argaamplus.com
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