term economic outlook is favorable, but the country should carefully monitor possible inflationary pressures, the International Monetary Fund said Tuesday. The Fund revised down its forecast for Saudi Arabia's fiscal surplus to 9.3 percent of gross domestic product in 2011, from 12.8 percent seen in April, it said after concluding its annual consultation with the Kingdom. The forecast for the 2011 current account surplus of the world's No.1 oil exporter was revised up to 20.1 percent of GDP, from a previous 19.8 percent. Meanwhile, KIPCO Asset Management Company (KAMCO) said in a separate report recently that the Saudi economy is expected to strengthen further in 2011. It said the growth would be fuelled by a robust increase in non-oil GDP indicating a rebound in the private sector supported by massive capital spending by the government and a rally in oil prices. KAMCO said the economy is poised for continued robust growth. Oil production is increasing further to compensate for lower output in the region. As a result, fiscal balance is likely to register strong surpluses in 2011. Reflecting the positive momentum, overall real GDP growth is projected by the IMF to reach 6.5 percent in 2011 with inflation likely to rise to about 6 percent as a result of both domestic and imported factors. The IMF pointed out that strong near-term outlook for the Saudi economy provides an opportunity to address longer-term priorities, high among these are providing jobs and housing for the growing young population. Key steps by the Kingdom will to continue progress in diversifying the economy, building on the positive business environment, and continuing to improve access to credit for small and medium enterprises (SMEs) as well as for housing. The new fiscal stimulus policy initiatives entail spending commitments over the next several years which will reduce fiscal surpluses and boost activities within the private sector. The government remains committed to diversify its economy away from the hydrocarbon sector as its recently announced budget focuses spending on construction and services sectors to boost fixed capital formation. Saudi Arabia's non-hydrocarbon sector will play an increasingly vital role in the economy, as the government's initiative to diversify the economy away from the hydrocarbon sector will bolster private consumption and gross fixed capital formation (GFCF). GFCF growth is expected to outperform all other expenditure components of GDP from 2011 onwards through to 2015. Spending on financing new and on-going projects is set at $68.3 billion, with a large portion of it marked for the public services sector.
