According to data published by the fund, the kingdom’s economy grew by 6.6 per cent in 2005 in real terms, with oil and non-oil gross domestic product (GDP) growing by 5.9 per cent and 6.8 per cent respectively. Low inflation, an increased external current account surplus and reduced central government debt all painted a bright picture for the economic outlook (see table).

‘Prospects for 2006 are very favourable in light of the expected sustained increase in global demand for oil,’ said the report. ‘Real GDP growth is expected to remain robust, at almost 6 per cent, despite lower oil sector growth. Both the external current account and the overall fiscal balance are expected to register substantial surpluses of 31.1 per cent of GDP and 17.2 per cent of GDP respectively Central government debt is projected to decline by around 23 percentage points to 17 per cent of GDP.’

While the IMF praised Riyadh’s management of the economy, it also entered some caveats. It urged the continuing diversification of the economy away from oil-based industries, flexibility in the Saudisation programme and a deepening of the capital market through increasing the supply of

corporate bonds and modifying the legal framework to allow

for the development of a

mortgage market.

Additionally, the fund said it ‘saw merit in the authorities’ decision to keep the current pegged exchange rate regime unchanged in the period

leading up to the GCC monetary union in 2010, while keeping an open mind about the choice of the exchange rate regime under the prospective monetary union’.