Exclusive Saudi Arabia's economic diversification positions Kingdom as global heavyweight: IMF

Al Arabiya

02-05-2025

Saudi Arabia's economic diversification strategy has positioned the Kingdom to compete directly with advanced economies as foreign direct investment rises, traditional oil dependency diminishes and the women's workforce more than doubles, according to a senior International Monetary Fund (IMF) official.
In an interview on Riyal Deal, presented by Al Arabiya News' Tom Burges Watson, Dr. Jihad Azour, director of the IMF's Middle East and Central Asia Department, highlighted Saudi Arabia's economic resilience amid global uncertainty, pointing to significant gains in non-oil sectors and improvements in key social indicators.
'Saudi economy is becoming much more complex, i.e., much more sophisticated. And this will allow the economy to be more competitive,' Azour said. 'Saudi is the largest economy in the region, but it's getting now more and more connected globally.'
The IMF recently published an economic outlook report entitled 'Charting a Path through the Haze,' which examines challenges faced by the Middle East, North Africa, Caucasus, and Central Asia regions amid trade tensions, conflicts, climate shocks, and political instability.
Saudi Arabia's economic transformation under its Vision 2030 plan has already shown tangible results, with unemployment reaching its lowest level in decades and female labor force participation more than doubling in just five years.
'Over the last few years, certain number of reforms have helped Saudi not only to grow the economy, but also to reduce unemployment,' said Azour. 'Unemployment is at the lowest level in decades, especially at the youth level. Women's participation in the economy increased from 14 percent to 34 percent in five years.'
These achievements are particularly notable given the series of global shocks affecting the region, including the COVID-19 pandemic and subsequent inflation crisis, said Azour, adding: 'Therefore, the Saudi economy is vibrant and dynamic.'
The IMF projects Saudi Arabia's real GDP to grow at 3 percent in 2025 and 3.7 percent in 2026, rates that compare favorably to other G20 economies despite some downward revisions due to OPEC+ production decisions.
'In 2021-22, Saudi was the highest growing economy in the G20, thanks to the effort of diversification,' Azour said. 'In 2025 and 2026, the increase in oil production, because of the latest agreement of the OPEC plus, will also grow the oil sector.'
The recent OPEC+ agreement to gradually increase exports will contribute to the recovery of both Saudi Arabia's oil sector and overall economy, according to Azour, though the impact has been somewhat tempered by softening oil prices in recent weeks.
Saudi Arabia is running 'one of the largest investment programs in the region,' according to Azour, with substantial foreign direct investment flowing into emerging sectors.
'We (have seen) a certain number of sectors, activities, that are…growing in the economy, which attracted FDIs,' Azour explained. When asked to specify these sectors, he pointed to 'technology is one, renewable is another one. You have a massive investment in hospitality, cultural, as well as also touristic activities.'
Unlike many regions globally, Saudi Arabia has maintained stable inflation rates, partly due to subsidy programs that help reduce price volatility.
'Inflation is very stable. I would say this is the case in most of the GCC economies,' said Azour. 'And part of it is due to the fact that there are still certain level of subsidies that are helping to reduce the volatility of prices in the economy.'
The IMF report emphasizes the impact of global uncertainty on all economies, with potential to reduce growth by 2.5 percent in the short term and 4.5 percent if prolonged for two years.
Despite these challenges, Saudi Arabia continues to show resilience.
'Uncertainty is affecting all countries in the world. And in fact, uncertainty usually has a negative impact on growth,' Azour explained. 'Yet compared to other parts of the world, the region is still growing.'
The IMF recently established a regional office in Riyadh, recognizing Saudi Arabia's growing influence in global economic affairs. Azour said that Saudi Arabia's Minister of Finance, Mohammed al-Jadaan - currently chairs the International Monetary and Financial Committee (IMFC), which oversees the work of the IMF.
'Saudi is becoming one of the magnets that is attracting not only investment, but also policymakers to discuss economic financial issues,' he said, citing a recent international conference in AlUla that gathered ministers, central bank governors, and scholars from emerging economies.
'This is the recognition of the regional and international role that Saudi is playing,' Azour added.
While trade tensions and potential tariffs pose risks to the region, they may also create opportunities for countries like Saudi Arabia to play an expanded role in the global economic landscape, he said.
When asked about his overall outlook for the region, Azour described it as robust but facing challenges.
'The region is resilient and has been able to withstand shocks and uncertainties. It was at a high cost, the cost of high unemployment, especially at the youth level, and slow growth for a certain number of countries,' he said.
'What the region needs is to keep modernizing itself, accelerate reforms, be more productive, give more opportunities to the private sector, especially small and medium-sized companies, get more integrated among countries in the region, but also increase the linkages with different geographies.'