The political transition has increased the focus on social conditions and
regional and rural development. Growth has been buoyed by new spending, retail credit,
and oil and gas investments. Inflation has picked up, and the current account has
deteriorated. Renewed fiscal consolidation is planned from 2020. Non-oil growth is
expected to moderate to 4 percent (potential), as construction, fiscal stimulus, and
household borrowing ease. Growth could be higher if decisive reforms drive productivity
gains. The state continues to play a strong role in the economy, and the authorities face
challenges ensuring that measures are well targeted and effective in promoting private
sector growth. The challenges include oil volatility and dependency, reliance on
subsidies and other state support, still-impaired banks, and governance vulnerabilities.
The authorities are exploring ways to strengthen the fiscal framework, assessing
monetary and exchange policies, undertaking a bank asset quality review (AQR), and
establishing an independent financial sector regulator. Progress is being made on
headline reforms, but ensuring decisive changes on the ground remains a challenge.
Risks relate to oil prices and trading partner growth.