Al-Sayari: Global imbalances need targeted policy

Governor Al-Sayari welcomed the renewed international focus on global imbalances, acknowledging that excessive disparities can indeed threaten global stability.

He highlighted that these risks often manifest through both trade and financial channels, leading to significant cross-border spillovers that can destabilize economies.

However, he also stressed the importance of recognizing that such imbalances are not always purely cyclical but can frequently reflect deep-seated structural characteristics inherent to various economies.

A critical priority, according to Al-Sayari, is to meticulously identify the underlying drivers of these imbalances.

This involves a clear distinction between fundamental structural factors, prevailing financial conditions, and any policy-related distortions that may be at play.

He advocated for increased scrutiny of non-market practices, industrial policies that distort competition, and various financial and tax-related frictions.

These elements, he noted, can significantly impact national savings and investment balances, ultimately leading to a persistent misallocation of resources across sectors.

Such a granular understanding is, he argued, indispensable for formulating policy conclusions that are both well-targeted and genuinely effective in addressing the root causes of imbalances.

The Governor further underscored the necessity for assessments of global imbalances to accurately reflect country-specific circumstances.

This is particularly pertinent for commodity-exporting economies, where external positions are often a reflection of long-term resource management strategies and deliberate national savings considerations rather than short-term fluctuations.

For these nations, he explained, accumulated external assets and other stock positions frequently offer a more informative and stable indicator of economic health than volatile short-term flow dynamics.

Al-Sayari expressed support for enhancing the capabilities of international institutions, advocating for improved data collection and analytical frameworks.

He stressed that these assessments must remain flexible and firmly grounded in country-specific judgment, avoiding a one-size-fits-all approach.

Regarding Saudi Arabia, he affirmed that the Kingdom's external position consistently aligns with its economic fundamentals and sound policy frameworks, a fact corroborated by recent assessments from the International Monetary Fund.

He concluded by noting that as Saudi Arabia progresses with its ambitious Vision 2030, its external balances are expected to continue evolving in harmony with its goals for sustainable and balanced economic growth.