Finance and Investment in SaudiArabia: The Role of Fiscal Policy 1 AHMED A. ALKHOLIFEY EXECUTIVE DIRECTOR FOR SAUDI ARABIA AT THE INTERNATIONAL MONETARY FUND
Stability 2 Stable Political System. Predictable Economic Policies: Consistent, credible, and clear policy messages. Well-Supervised Financial Sector: Well capitalized and highly profitable banking sector. Attractive Business Environment.
Global Role 3 Systemic Role of Saudi Arabia: Positive spillover effects of policies pursued by Saudi Arabia 2005-2009 2009 2010 Imports (% of GDP) 20.0 23.0 21.6 Remittances (bln. SR) 340.7 94.4 98.2 Ensuring sustainable supply and stability of energy markets. The G20: Framing the new path for strong, sustainable, and balanced growth.
Growth 4 Real GDP* 2009 2010 2011 Saudi Arabia 0.1 4.1 6.5 World Output -0.7 5.1 4.0 Advanced Economies -3.7 3.1 1.6 Emerging and 2.8 7.3 6.4 Developing Economies *IMF World Economic Outlook, Oct 2011 Non-Oil GDP 2005-2009 2010 2011 Saudi Arabia 4.6 4.9 5.4 GCC 3.6 4.5 5.3
5 Government Hydrocarbon Revenue and Total Expenditure, 1980–2010 (In U.S. dollar billions) Fiscal Policy Hydrocarbon Revenue Consistent & countercyclical Government ExpenditurePriorities: Investment in infrastructure. Investment in human capitalCompetitiveness: Enhancing productivity of physical and human capital
Government Spending 6 2011 Appropriations* for the main Government expenditures (Billion SR) development sectors Specialized Credit Institutions 580* 13% Water, Agr Education iculture, an and d Training Infrastructure 41% 346 14%Transport& Telecom 7% Health and social Affairs 19% Municipalities 6% *Projections *Projections
Promotion of Finance 7 •finances large scale government and Total loans and share of SCIs PIF (1971): private projects during 2006-2010 117.5 (bil SR)REDF (1974): •finances real estate sectorSIDF (1974): •finances industrial projects •provides interest-free loans for smallSCB (1971): and emerging businesses and 37.8% professions 18.7% •finances farmers and agricultural 19.9% 20.9%ADF (1962): projects 2.2%Direct Loan •Extends credit to private sector entities Program for the purposes of establishing ADF SCB PIF (1971): development projects. (SR 7.0 Billion) SIDF REDF yr total
Conclusion 8 Attractive business environment: Promising growth potentials Low tax rate (max. 20%) and business friendly tax administration. Large economic size Supportive economic policy including good finance terms