Overall, however, the Kingdom’s GDP growth is set to ease to 1.7 percent this year due to a stagnation in crude oil production in the context of the December 2018 OPEC+ agreement, he added.
In May, the Ministry of Finance said the Kingdom had recorded a surplus of SAR 27.8 billion ($7.41 billion) in the first quarter of 2019, boosted by both oil and non-oil revenues. Non-oil revenue rose by 46 percent year-on-year (YoY) to SAR 76.3 billion in Q1 2019, while oil revenues increased by 48 percent to SAR 169.08 billion, it added.
Last month, the International Monetary Fund’s Mission Chief for Saudi Arabia and Assistant Director in the Middle East Department Tim Callen told Argaam that raising the rate of value-added tax (VAT) could help Saudi Arabia boost its revenues and achieve fiscal targets.
Echoing the same view, Iradian said that Saudi Arabia needs to gradually increase the VAT rate from the current level of five percent in the coming years.
"It is important that the authorities rely more on non-oil government revenues as oil revenues will remain subdued in the coming years due to the prolonged low oil prices.”
When asked if Saudi Arabia has done sufficient in terms of structural reforms, Iradian said that the case for widespread fundamental reforms remains strong, but bureaucracy and lack of transparency are some of the impediments to achieving sustained rapid private sector growth.
Foreign direct investment (FDI), which is critical to the success of the Vision 2030, while doubling in 2018, remains less than one percent of GDP, Iradian noted.
Read: Foreign investment in Saudi Arabia more than doubled in 2018: report
"The Kingdom needs to attract adequate FDI outside the energy sector to support the government's plan to diversify the economy and create a dynamic and expanded private sector,” he said.
To achieve the Kingdom’s Vision 2030 plan, deeper structural reforms are necessary; such as reforming labor market regulation, overhauling the educational system, improving the business climate and governance, and improving access to finance— particularly for SMEs.
Write to Parag Deulgaonkar at parag.d@argaamplus.com
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