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Middle East and Central Asia > Saudi Arabia

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Cover Policy Papers
Gulf Cooperation Council: Economic Prospects and Policy Challenges for the GCC Countries
International Monetary Fund. Middle East and Central Asia Dept.
GCC policymakers have managed to quickly mitigate the economic impact of the twin COVID-19 and oil price shock. Commodity prices have surged, and the outlook is more positive for GCC countries, with new challenges linked to Russia’s invasion of Ukraine and tighter global financial conditions expected to have a limited impact on GCC economies. While GCC countries have overall benefited from higher, albeit volatile hydrocarbon prices, numerous risks still cloud the outlook—notably a slowdown in the global economy. In this context, the reform momentum established during the low oil price years should be maintained—irrespective of the level of hydrocarbon prices.
Keywords:
inflation dynamics; diversification Index; food CPI weight; Oil prices; Financial conditions index; Global
Cover Policy Papers
Economic Prospects and Policy Challenges for the GCC Countries - 2021
International Monetary Fund
GCC policymakers moved quickly to mitigate the health and economic impacts of twin COVID-19 and oil price shocks. Infection rates have declined across the GCC to well below previous peaks, though countries have experienced successive waves of the virus, and economic recoveries have begun to take hold. Nevertheless, GCC policymakers must navigate a challenging and uncertain landscape. The pandemic continues to cloud the global outlook as countries are in different phases of recovery, with varied growth prospects and policy space
Keywords:
oil market development; oil growth; oil balance; climate change impact; GCC economy; Oil prices; COVID-19; Oil consumption; Climate change; Global; Fiscal stance
Cover Policy Papers
Approaches to Macrofinancial Surveillance in Article IV Reports
International Monetary Fund
The Fund has made good progress over the past two years in integrating macrofinancial analysis into Article IV surveillance for a wide range of members. Building on past work to enhance financial sector analysis, Fund staff has sought to develop a consistent and forward-looking view on how the financial sector affects each member’s economic outlook with the aim of strengthening staff’s capacity to provide advice on macro-critical questions. The focus has been on developing a fuller understanding of macrofinancial linkages, and applying this analysis to inform policy advice. Staff has sought to articulate the role of the financial sector in the macroeconomic baseline, and to integrate the financial sector into the risk assessment, taking into account both the impact of macro shocks on the financial sector as well as the effect of financial shocks on macroeconomic stability. Strengthening the analytical foundations of this work has helped staff provide advice in all policy areas, including financial sector policies. Staff has tailored macrofinancial analysis to the circumstances of a diverse set of economies. Area departments have taken the lead in selecting 66 economies for enhanced macrofinancial coverage and in identifying topics, drawing on targeted support from functional departments. The choice of coverage has included legacies from the global financial crisis—such as deleveraging and stretched balance sheets in advanced economies and some emerging markets—and more recent challenges such as commodity price shocks, especially in low income countries, and the risks of housing booms. The financial sector’s contribution to growth and inclusion has become an important question in countries across all income groups. Staff sees benefits in mainstreaming this approach across the membership, while continuing to address analytical gaps and adapting to new challenges. The work of the past two years has underscored the criticality of macrofinancial analysis for a diverse range of members, and laid the basis for progressively mainstreaming macrofinancial surveillance across the membership. Building on this progress, staff sees scope for the Fund to deepen its understanding of the macroeconomic effects of financial shocks, to better adapt microprudential and macroprudential policy advice with an assessment of macro-critical risks including systemic risk, and to deepen the analysis of outward spillovers. Staff will also need to continue to adapt the focus of analysis and tools, and seek relevant data, as economic challenges evolve.
Keywords:
PP; importance; IMF surveillance; bank; market; risk; article IV report; financial market; fiscal policy; private sector; Financial sector; Macrofinancial analysis; Credit; Financial cycles; Financial sector risk; Global; Africa
Cover IMF Working Papers
The Impact of Oil Prices on the Banking System in the GCC
Padamja Khandelwal
,
Mr. Ken Miyajima
, and
Mr. Andre O Santos
This paper examines the links between global oil price movements and macroeconomic and financial developments in the GCC. Using a range of multivariate panel approaches, including a panel vector autoregression approach, it finds strong empirical evidence of feedback loops between oil price movements, bank balance sheets, and asset prices. Empirical evidence also suggests that bank capital and provisioning have behaved countercyclically through the cycle.
Keywords:
WP; NPL ratio; oil price; price growth; GCC bank; Macro-financial linkages; nonperforming loans; panel vector autoregression; asset price appreciation; bank asset quality; Oil prices; Credit; Financial cycles; Capital adequacy requirements; Global
Cover IMF Working Papers
External Linkages and Policy Constraints in Saudi Arabia
Mr. Niklas J Westelius
The constraints that external linkages impose on domestic policy choices in Saudi Arabia have continuously evolved over the past four decades. This paper argues that two major ongoing developments in particular have affected and will continue to affect policy trade-offs. First, growing oil needs of emerging market economies (EMEs), and specifically those of developing Asia, have strengthened economic links between the Far East and Saudi Arabia. Second, financial sector development in Saudi Arabia has gradually strengthened the monetary transmission mechanism. The former implies the increased importance of developing Asia’s growth cycle for the Saudi economy, while the latter suggests greater influence of U.S. monetary policy on the non-oil economy through the peg to the U.S dollar. As a result, divergence between the growth cycles in developing Asia and the United States has the potential to increasingly generate tension between policy objectives in Saudi Arabia.
Keywords:
WP; interest rate; oil price; oil revenue; banking system; Saudi Arabia; oil export; oil GDP; oil price shock; Oil prices; Oil; gas and mining taxes; Credit; Business cycles; Global; Asia and Pacific
Cover Policy Papers
Enhancing Surveillance - Interconnectedness and Clusters - Background Paper
International Monetary Fund
This paper provides additional detail for the framework discussed in “Enhancing Surveillance – Interconnectedness and Clusters” through theoretical and empirical analysis of linkages, including case studies of Saudi Arabia, the Asian supply chain, financial interconnectedness and cross-border policy dependence in banking, and the Sweden-Baltic connections. It also provides a detailed primer on network analysis.
Keywords:
PP; business cycle; exchange rate; monetary policy; emerging market; real GDP; U.S. dollar; interest rate; central bank; Business cycles; Oil prices; Consumption; Credit; Financial integration; Global; Baltics; Asia and Pacific; East Asia; Europe
Cover IMF Working Papers
Desynchronized: The Comovement of Non-Hydrocarbon Business Cycles in the GCC
Mr. Serhan Cevik
This paper investigates the empirical characteristics of business cycles and the extent of cyclical comovement in the Gulf Cooperation Council (GCC) countries, using various measures of synchronization for non-hydrocarbon GDP and constituents of aggregate demand during the period 1990-2010. By applying the Christiano-Fitzgerald asymmetric band-pass filter and a mean corrected concordance index, the paper identifies the degree of non-hydrocarbon business cycle synchronization?one of the main prerequisites for countries considering to establish a monetary union. The empirical results show low and heterogeneous synchronization in non-hydrocarbon business cycles across the GCC economies, and a decline in the degree of synchronicity in the 2000s, if Kuwait is excluded from the sample, partly because of divergent fiscal policies.
Keywords:
WP; GCC country; aggregate demand; Business cycles; business cycle synchronization; band-pass filter; concordance; GCC economy; Non-hydrocarbon business cycle frequency; business cycle analysis; pairwise correlation coefficients; business cycle desynchronization; Monetary unions; Private consumption; Government consumption; Public investment spending; Asia and Pacific; Global
Cover IMF Working Papers
New Indicators for Tracking Growth in Real Time
Mr. Troy D Matheson
We develop monthly indicators for tracking growth in 32 advanced and emerging-market economies. We test the historical performance of our indicators and find that they do a good job at describing the business cycle. In a recursive out-of-sample forecasting exercise, we find that the indicators generally produce good GDP growth forecasts relative to a range of time series models.
Keywords:
WP; real GDP
Cover IMF Working Papers
Monetary Policy Analysis and Forecasting in the Group of Twenty: A Panel Unobserved Components Approach
Mr. Francis Vitek
This paper develops a panel unobserved components model of the monetary transmission mechanism in the world economy, disaggregated into twenty national economies along the lines of the Group of Twenty. This structural macroeconometric model features extensive linkages between the real and financial sectors, both within and across economies. A variety of monetary policy analysis and forecasting applications of the estimated model are demonstrated, based on a Bayesian framework for conditioning on judgment.
Keywords:
WP; monetary policy
Cover IMF Working Papers
Cross-country Consumption Risk Sharing, a Long-run Perspective
Mr. Zhaogang Qiao
This paper estimates an empirical nonstationary panel regression model that tests long-run consumption risk sharing across a sample of OECD and emerging market (EM) countries. This is in contrast to the existing literature on consumption risk sharing, which is mainly about risks at business cycle frequency. Since our methodology focuses on identifying cointegrating relationships while allowing for arbitrary short-run dynamics, we can obtain a consistent estimate of long-run risk sharing while disregarding any short-run nuisance factors. Our results show that long-run risk sharing in OECD countries increased more than that in EM countries during the past two decades.
Keywords:
WP; time series; math