High oil prices will drive Saudi Arabia’s economic growth to outpace the US this year, IMF says
- High oil prices will likely cause Saudi Arabia’s economic growth to outpace that of the US this year, the IMF said.
- Estimates show the kingdom’s real GDP will rise by 7.6% this year, compared to estimates of 2.3% for the US.
High oil prices will likely cause Saudi Arabia’s economic growth to outpace that of the US this year, according to the International Monetary Fund.
Saudi Arabia’s GDP is expected by the IMF to increase by 7.6 percent this year – the fastest rate of expansion in nearly a decade. Meanwhile, the US is likely to grapple with high inflation until 2023, with estimate real domestic GDP growth at 2.3%, less than half of last year’s growth of 5.7%.
The GDP growth spurt for Saudi Arabia comes after the oil-rich nation took bigger economic hit from the pandemic in 2020, when its GDP shrank by 3.4% compared to negative 2.3% in the US.
“Saudi Arabia is likely to be one of the world’s fastest-growing economies this year as sweeping pro-business reforms and a sharp rise in oil prices and production power recovery from a pandemic-induced recession,” the IMF said in a report on Wednesday.
And the kingdom looks like it wll be able to maintain its pace of growth for awhile; Saudi Arabian oil prices are set to grow at their fastest rate in over 10 years. That comes at the same time that big oil customers like India have ramped up purchases of Saudi crude significantly as the kingdom competes with Russia as a supplier.
Although the economic outlook will depend on whether the kingdom overspends its extra oil revenue, the IMF said, the estimates are in contrast to the situation for the US economy, which is dealing with a number of headwinds to growth.
US inflation is expected to average 6.6% in 2022 according to the IMF, down from the current rate 8.5%, and recession fears are still mounting. Saudi Arabia, by contrast, is expected to maintain 2.8% average inflation through the year.
While US inflation has cooled slightly from 41-year-highs, leading some analysts to predict a record stock market rally ahead, others think high prices will be sticky and could possibly send the economy into a stagflationary crisis. That would place further pressure on the Federal Reserve as it tries to balance its inflation fight with the desire to maintain growth.