The impact of tariffs imposed by the US on Saudi Arabia is expected to be “close to zero”, underpinning the kingdom’s resilience against global economic shocks, the International Monetary Fund (IMF) has said.
The kingdom, the Arab world’s largest economy, was hit with a 10 per cent tariff in April – the lower tier of the levies set by US President Donald Trump.
But with more than three quarters of Saudi exports to the US exempt from the levies, the direct impact will be “quite limited”, Amine Mati, the IMF’s mission chief for the Middle East and Central Asia, told the media on Monday.
“If we were to look at trade with respect to the US, a lot of the trade is in oil products and non-oil exports are actually a very small portion,” he said.
Saudi Arabia’s non-oil exports to the US that could be subject to the tariffs are between 3 per cent and 4 per cent of total exports, which would mean “the impact is almost none or close to zero”, he added.
“There are some trade diversion gains … textiles and others could benefit, but [others such as] the chemical industries, because of the extra tariffs, would be losing.”
Saudi Arabia’s economy has shown “strong resilience”, defying global economic shocks amid the growth of its non-oil economy, tamed inflation and record-low unemployment, the IMF said in its annual assessment of the kingdom on Monday.
The kingdom is expected to keep its non-oil growth above 3.5 per cent over the medium term, which mirrors the positive impacts led by its Vision 2030 economic programme, the Washington-based lender said.
The IMF last week projected Saudi Arabia’s economy to expand at a 3.6 per cent pace in 2025 and 3.9 per cent in 2026, supported by the continued phase-out of Opec production cuts.
In 2024, non-oil real gross domestic product grew by 4.5 per cent, driven by retail, hospitality and construction, according to the agency.
The country, the world’s top oil-exporting nation, has enjoyed robust domestic demand spurred by government-led projects and the hosting of major international events, the IMF said.
Consumer prices are expected to remain contained, it added.
Saudi Arabia’s banking sector remained resilient, with lenders’ balance sheets staying robust underpinned by high capitalisation, profitability and non-performing loans at their lowest levels in nearly a decade, the IMF said. Services, industry and manufacturing also remain healthy.
Unemployment among Saudi nationals also hit a record low, as the jobless rate among youth and women halved over four years, the lender added.
The kingdom’s current account deficit is projected to persist over the medium term at around 3 per cent, as “investment-linked imports will continue as well as remittance outflows and despite some continued improvement in non-oil exports”, Mr Mati said.
Risks remain in the near term, however, including those from weaker oil demand due to global trade tensions, lower government spending and regional security risks that could dampen investor sentiment, he added.
“Of course, on the upside, if you have higher oil production or additional investment linked to Vision 2030 or accelerated implementation of reforms, that could also boost growth further,” Mr Mati said.
Saudi Arabia is focusing on diversifying its economy away from oil with an emphasis on the development of sectors such as technology, property, tourism and infrastructure as part of Vision 2030.
The kingdom is supporting the development of several industries spanning different sectors to generate employment and help its non-oil economy to grow.
Technology will also play a vital role in Saudi Arabia’s future economy, with the kingdom “well-poised and well-placed” to take advantage of innovations such as artificial intelligence in terms of digitalisation among its ranks, Mr Mati said in response to a question from The National.
While the IMF does not have a direct measure for technology, it acknowledged that “this is an area of current work [for the kingdom], particularly because you need to look at it with respect to non-oil productivity more than total productivity”, he said.
Directors of the IMF’s executive board said Saudi Arabia’s strong economic performance merits a “favourable” outlook, “helped by appropriate macroeconomic policies, strong buffers and impressive reform momentum”.
The directors agreed that a gradual fiscal consolidation is needed to achieve intergenerational equity, which could be achieved “through broader tax policy reforms to increase non-oil revenue, wage bill containment, energy subsidy reform alongside better targeting social safety nets and streamlining of non-essential expenditures”.
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