Saudi Arabia's short-term economic outlook is favourable but the government should keep an eye on inflationary pressures after its pledged increase in social spending, the International Monetary Fund (IMF) said this week.
The global body made its statement after annual consultations with the Kingdom.
The Saudi government earlier this year announced plans to lavish US$130 billion of its vast oil wealth on social and welfare projects, in a move many regional commentators read as an effort to buy off the kind of popular dissent seen across much of the rest of the Middle East.
In view of the spending plans, the IMF warned Saudis to "carefully monitor possible inflationary pressures" while encouraging "the proactive use of fiscal policy, supported by available monetary policy instruments, if needed."
Inflation may average 6 per cent this year, the IMF said, adding that the Kingdom's policy priorities should focus on maintaining fiscal sustainability over the medium-term, securing broad-based growth and fostering job creation.
The IMF left its Saudi gross domestic product growth and inflation forecasts for 2011 unchanged at 6.5 per cent and 6.0 per cent respectively.