The International Monetary Fund (IMF) on Monday revised down Saudi Arabia's economic growth forecast for 2021 to 2.1% from 2.9%.
The growth forecast for 2022, however, was revised up to 4.8%, from the previous estimate of 4% that was noted in the IMF's World Economic Outlook report in March.
Saudi economy contracted by 4.1% last year, according to the international organization.
The country's non-oil gross domestic product (GDP) growth rebounded in the second half of 2020, while indicators suggest the recovery has continued in 2021, the IMF said. It expects non-oil growth to come at 3.9% in 2021 and 3.6% in 2022, from a contraction of 2.3% in 2020.
"Real oil GDP growth is projected at -0.5 percent in 2021 (-6.7 percent in 2020) given production levels agreed by OPEC+ and 6.8 percent in 2022 as the OPEC+ agreement is assumed to end as announced," the IMF said in its concluding statement of the 2021 Article IV mission.
As the coronavirus pandemic hit global oil demand and caused prices to plummet last year, Saudi Arabia's oil revenues fell and expenditure needs increased. These caused budget deficit widening to 11.3% of GDP in 2020, significantly up from 4.5% in 2019, according to the IMF.
"To secure the recovery and spur stronger growth, policymakers need to carefully manage the exit from the remaining COVID-related support and continue the longer-term reform agenda under Vision 2030," the organization said.
"Fiscal consolidation is needed but should be carefully calibrated in the short-term to ensure the recovery continues to be well supported," it added.
The IMF noted that unemployment rate for Saudi nationals increased to 15.4% in the second quarter of 2020 before declining to 12.6% in fourth quarter of last year.
By Ovunc Kutlu