CAIRO: The Saudi economy is likely to grow by 4.9 percent in 2022 on the back of a rebound in the oil sector, KPMG and Beltone Financial Holding have predicted.

KPMG, one of the Big Four accounting organizations, said in its report that oil output is expected to increase at an annual rate of 10 percent in 2022 due to the unwinding of oil supply cuts that were part of the OPEC+ agreement. However, it added, the expansion will follow a possible contraction in the sector in what is remaining of 2021.

Beltone Financial Holding, an investment bank based in Egypt, said oil output is set to reach an average of 10.2 million barrels per day in 2022, reflecting an annual expansion rate of 7.8 percent in the sector.

Higher oil output and prices are also predicted to boost consumer and business confidence, the report said.

Moreover, the Saudi non-oil sector is expected to show signs of strength in 2022. The sector is already witnessing a rebound following the ease of pandemic-induced restrictions. The retail and tourism sectors will get a further boost in the next year.

KPMG pointed out that gross domestic product growth for 2021 is expected to be 2.4 percent.

The Netherlands-based company also stated that it projects consumer prices to rise by 3.1 percent in 2021 and 2.2 percent in 2022, adding that government policy will directly affect the inflation rate. Nevertheless, KPMG said that upward inflationary pressures are still present. Rising international prices for imports, induced by low supply or higher transportation costs, might drive consumer prices up.

In addition, a weaker dollar could also cause more inflation since the Kingdom’s riyal is pegged to the US dollar.

As for unemployment, the firm expects the jobless rate to continue its decline, falling to a projected 6.3 percent in 2022 from an expected 6.5 percent in 2021. This is compared to the sharp fall the indicator experienced moving from 2020 to 2021, as it declined from 7.7 percent to 6.5 percent.

The accounting organization stated that this sharp drop was induced by a temporary event, which is the re-opening of the economy following the pandemic’s peak. Hence, the fall in unemployment is set to decelerate in 2022.

Looking at the Middle East region as a whole, KPMG said that the Gulf Cooperation Council countries are forecast to have the most significant effect on the region’s rebound. This is mainly due to higher oil prices. However, any unexpected falls in oil demand will adversely affect this recovery, the report remarked. A fresh outbreak of COVID-19 could also pose threats to the region.

The firm added that unemployment rates are also expected to drop in the Middle East. 

Concerning consumer prices, inflation is likely to be weak in the GCC countries over the coming period while other, non-GCC countries are expected to grapple with higher inflationary pressures.