The International Monetary Fund (IMF) on Wednesday maintained its economic growth forecast for Saudi Arabia even as concerns persist that the global economy may heading towards a recession.

Saudi Arabia’s economy was still projected to grow by 7.6 per cent this year, which the IMF said would likely be one of the fastest growth rates in the world, helped by strong oil demand and 4.2 per cent expected growth in the kingdom’s non-oil sector.

Inflation in Saudi Arabia – expected at 2.8 per cent this year – was contained and there had been limited fallout for the kingdom from Russia’s invasion of Ukraine, the IMF said.

Saudi Arabia’s government has forecast its economy to grow by 7.4 per cent this year.

A surge in demand for oil has helped Saudi Arabia, the world’s biggest oil exporter, refill state coffers hammered during the COVID-19 pandemic. Government officials have said the kingdom would restrict spending and conserve cash rather than let oil price booms drive spending like it had in the past.

IMF Mission Chief Amine Mati told Reuters he believed Saudi Arabia would maintain control over spending although the IMF said in its report there was scope for more targeted social spending to help ease the impact of rising costs on the kingdom’s low-income citizens.

Mati said the kingdom’s expected 5.5 per cent of GDP fiscal surplus this year, its first since 2013, would be equivalent to around 211 billion riyal ($56.21 billion).

Saudi Arabia in 2020 tripled VAT to 15 per cent as the pandemic hit oil revenues but officials later said the rate could be lowered.

Mati said the IMF believed Saudi Arabia should maintain the rate at 15 per cent and that the government should consider taxing income and property as a means of increasing its non-oil sector revenues.

The IMF in July cut global growth forecasts, warning that risks from high inflation and the Ukraine war were materializing and could push the world economy to the brink of recession if left unchecked.

The IMF said the kingdom’s real GDP was forecast to expand by 3.7 per cent next year and non-oil GDP to grow by 3.8 per cent.

($1 = 3.7541 riyals)