Economy

Saudi central bank shrugs off weaker growth forecast as tourism sector heats up

Key Points
  • The opening up of Saudi Arabia's tourism sector will boost the country's growth outlook and protect the economy from a slew of rising external risks, according to Ahmed Alkholifey, governor of the Saudi Arabian Monetary Authority.
  • The governor was speaking on the sidelines of the G-20 Conference on Domestic Capital Markets Development in Riyadh, Saudi Arabia. The kingdom assumed the G-20 presidency for 2020 last month.
  • Separately, Alkholifey said the central bank is "comfortable" with the moves it is seeing from the Federal Reserve.
Ahmed Alkholifey, the governor of the Saudi Arabia Monetary Authority (R) attends the Islamic finance conference "a universal value proposition" in Kuwait City on May 2, 2018.
YASSER AL-ZAYYAT | AFP | Getty Images

The opening up of Saudi Arabia's tourism sector will boost the country's growth outlook and protect the economy from a slew of rising external risks, according to the kingdom's central bank governor.

"This is a step in the right direction when it comes to economic diversification," Ahmed Alkholifey, governor of the Saudi Arabian Monetary Authority, told CNBC's Dan Murphy in an exclusive interview on Thursday.

"We are hoping that the non-oil sector will be leading to more economic growth ... this year," he said.

The governor was speaking on the sidelines of the G-20 Conference on Domestic Capital Markets Development in Riyadh, Saudi Arabia. The kingdom assumed the G-20 presidency for 2020 last month.

"The presidency is coming at a time when the global economy is at a crossroad," Alkholifey said, citing rising geopolitical tensions, worries over trade and vulnerabilities in the financial sector as top global concerns in the year ahead.

IMF downgrade unlikely to change national priorities

The Middle East also faces concerns of its own.

The International Monetary Fund this month cut its economic outlook for the region, citing a downward revision to Saudi Arabia's own projection on expected weaker oil output growth following the OPEC+ decision in December to extend supply cuts.

Middle East and Central Asia growth was revised down by 0.1 percentage point to 2.8% this year, while the IMF reduced Saudi Arabia's growth forecast to 1.9% from 2.2%.

"We are not far from that reading coming from the IMF. However, we might be more optimistic when it comes to the private sector – coming from the tourism sector," Alkholifey said.

Last September, the kingdom announced that it would be launching its first-ever tourist visas in a bid to boost tourism. Before then, the vast majority of foreign visitors were religious pilgrims.

He added that there has been "very strong pick up" in the retail, transportation and construction sectors, which he said constitute more than 60% of the private sector.

Fed policy impacts Saudi Arabian outlook

Separately, the governor weighed in on the impact of Fed policy on Saudi Arabia's economy. The Federal Reserve held interest rates steady at its meeting this week.

"I can assure you that we are comfortable with the moves we are seeing," Alkholifey said. "It is saving our economy, because more accommodation coming from monetary policy here in Saudi Arabia will be impacting our economy positively."

The Saudi currency is pegged at 3.75 riyals to the U.S. dollar, meaning domestic rates often move in lockstep with the United States.

—CNBC's Natasha Turak contributed to this report.