Saudi Arabia is moving ahead with economic reforms and growth in its non-oil economy will pick up this year despite any delay to a planned sale of shares in national oil giant Saudi Aramco, a senior International Monetary Fund official said on Friday. "Aramco was one part of the reform program. Other parts are moving ahead pretty well," Tim Callen, the IMF's mission chief for Saudi Arabia, told reporters after annual consultations with the Saudi government. He said the IMF's projections for Saudi economic growth to accelerate in coming years were based on expectations for a broad range of reforms to continue, and did not include the impact of the initial public offer of Aramco shares. Industry sources told Reuters this week that the sale of a roughly 5 percent stake in Aramco, originally slated to take place this year and raise at least $100 billion for the government, had been postponed indefinitely. The IPO, designed to raise money for reinvestment in non-oil industries, was one of the most prominent of the government's reform plans. It stalled when it became clear Riyadh might not achieve the valuation it wanted for Aramco, and that the company could face tough disclosure requirements if it listed overseas. Callen, while stressing he could not comment on the status of the government's plans for Aramco, said the fate of the IPO did not affect prospects for a much broader range of other reforms, including steps to improve the business environment, create jobs and strengthen state finances. "If it does those things, economic prospects will look positive," he said, adding that there had been progress in areas such as developing Saudi Arabia's capital markets and legal system. Callen noted that any delay to the Aramco IPO would require the government to rethink how it finances its Public Investment Fund, which it wants to jump-start many economic development projects. The PIF may already have solved that problem. A source told Reuters this week that it had raised $11 billion via its first commercial loan from banks, while it is also discussing the sale of a stake in petrochemical maker Saudi Basic Industries to Aramco that could raise $70 billion. An IMF report on the annual consultations predicted Saudi Arabia's gross domestic product would grow 1.9 percent this year, partly because of higher oil output, after shrinking 0.9 percent last year. Non-oil GDP growth is projected to accelerate to 2.3 percent in 2018 from 1.1 percent in 2017. "Growth is expected to pick up further over the medium term as the reforms take hold and oil output increases," the IMF said. It also predicted a strengthening of Riyadh's state finances because of higher oil and non-oil revenues. The budget deficit is forecast to narrow to 4.6 percent of GDP in 2018 and 1.7 percent 2019 from 9.3 percent last year. In subsequent years, however, the deficit looks likely to widen back toward 3.6 percent of GDP in 2023 — instead of narrowing to zero in that year as Riyadh projects — as oil prices resume weakening, the IMF said. It advised the government to save rather than spend any windfall revenues from higher-than-expected oil prices.
