THE KINGDOM OF SAUDI ARABIA
The Kingdom of Saudi Arabia has a vibrant and a thriving economy, which represents the largest in the Gulf region and the 20th largest in the world. Saudi Arabia is committed to enhancing its business climate to make it more attractive to foreign investment. Currently, it is ranked 29th out of 138 countries worldwide in the World Economic Forum’s Global Competitiveness Index, the most comprehensive assessment of national competitiveness worldwide
THE ECONOMY
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VISION 2030
King Salman hailed the achievements related to decreasing the deficit of the budget of the current fiscal year to 8.9% of the GDP from 12.8% during the last fiscal year. Despite increasing the expenditure in next year’s budget, he added that the target is to decrease the deficit to be less than 8% of the Gross Domestic Product, in spite of the great and expansionary volume of the budget.
King Salman hailed the achievements related to decreasing the deficit of the budget of the current fiscal year to 8.9% of the GDP from 12.8% during the last fiscal year. Despite increasing the expenditure in next year’s budget, he added that the target is to decrease the deficit to be less than 8% of the Gross Domestic Product, in spite of the great and expansionary volume of the budget.
The first pillar of our vision is our status as the heart of the Arab and Islamic worlds. We recognize that Allah the Almighty has bestowed on our lands a gift more precious than oil. Our Kingdom is the Land of the Two Holy Mosques, the most sacred sites on earth, and the direction of the Kaaba (Qibla) to which more than a billion Muslims turn at prayer. The second pillar of our vision is our determination to become a global investment powerhouse. Our nation holds strong investment capabilities, which we will harness to stimulate our economy and diversify our revenues. The third pillar is transforming our unique strategic location into a global hub connecting three continents, Asia, Europe and Africa. Our geographic position between key global waterways, makes the Kingdom of Saudi Arabia an epicenter of trade and the gateway to the world.
A. REALIZING SAUDI ARABIA’S FULL POTENTIAL BY 2030
- GDP could double again
- $4 trillion to be invested in the non-oil economy, primarily from private sources
- 6 million additional Saudi nationals in the workforce
- 60% increase in Saudi household income
- $800 billion GDP increase
B. EIGHT SECTORS THAT WILL GENERATE GROWTH AND JOBS
- Tourism
- Finance
- Construction
- Health care
- Mining and Metals
- Petrochemicals
- Manufacturing
- Retail and wholesale trade
C.THE THREE TRANSFORMATION PILLARS
Sustainable fiscal management
- An overhaul of the existing model based on oil revenue and public spending
- More efficient spending and a new focus on value for money
Economic reform
- More competition and greater openness to foreign investment and trade
- Simpler and speedier processes to remove hurdles to private-sector growth
More productive workforce
- Increased employment and participation of men and women in the labor force
- Eliminating the mismatch between skills and the needs of the labor market
The Saudi Arabian economy is the largest in the Gulf region, and the country is the only nation in the region that is a member of the G-20 group of major economies. Saudi Arabia has an oil-based economy with petroleum accounting for approximately 87 percent of budget revenues, 42 percent of GDP, and 90 percent of export earnings revenue. Current GDP is estimated at USD 681.2 billion. In response to the sustained period of low oil prices and the realization that a primary commodity-based economy is not sustainable, the government is seeking to step up and accelerate its drive to diversify the economy from an over dependence on oil.
The following are some indicators of how KSA is positioned in today’s world community economically:
- 2nd globally in oil reserves, production and exports.
- 4th in natural gas reserves.
- 0th in producing natural gas.
- Largest petrochemical producer in the Arab Region.
- One of the largest 20 economies in the world.
- Largest Arab economy.
- One of the largest economies in MENA by GDP.
- 78th globally in the Economic Freedom Index (Heritage Foundation).
- 25th globally (among 140) in the Global Competitiveness Index (Heritage).
- 43rd globally (among 130) in the Global Innovation Index (Cornell).
- 29th globally in openness to world economy and initiatives (Davos).
The Custodian of the Two Holy Mosques King Salman issued a Royal Decree approving the private sector stimulation plan, allocating SR72 ($19) billion for the plan. The plan initiatives include the:
- Subsidized Housing Loans Initiative.
- Projects Support Fund Initiative.
- Supporting Financially Distressed Companies initiative.
- Exports Promotion Program Initiative.
- Exports Finance Enhancing Initiative.
- Indirect Loan for Small and Medium Enterprises Initiative.
- The government Risk Capital Initiative for small and medium enterprises.
- The Government Fees Refunding Initiative for small and medium enterprises.
- Mega Investment Program Initiative.
- Broadband and Optical Fiber Stimulation Initiative.
- Building Technologies Stimulation Initiative.
The private sector stimulation packages aim at strengthening competitive capabilities of a number of segments of the economy, develop its outcomes as well as improve business and investment environment and facilitate the packages implementation under Vision 2030.
The annual World Investment Report 2020 analyzed trends in foreign direct investment around the world, at regional and national levels. The latest edition revealed that Saudi Arabia is one of the top destinations for foreign direct investment in the West Asia region, and accounted for a majority of regional inflows before the economic downturn caused by the COVID-19 pandemic began to have an effect.
Foreign direct investment in Saudi Arabia rose to $4.6 billion in 2019, according to the World Investment Report 2020 published by the United Nations Conference on Trade and Development. For a second consecutive year the figure increased by 7 percent, which is more than three times the level of growth recorded in 2017.
The report identified improvements to the business environment in Saudi Arabia as a key driver of annual growth. In particular it highlighted a number of the economic reforms last year as improving the overall ease of doing business.
In a report published by the World Investment Report on June 16, 2020, confirmed that an upward trend indicated by investor license figures released last month by Invest Saudi. These revealed a 19 percent increase in the number of licenses granted by the Kingdom in the first three months of the year 2020 compared with the same period last year.
“Saudi Arabia continued to see this encouraging pattern of growth in the first quarter of 2020, with strong month-by-month increases in the number of international companies setting up in the Kingdom recorded in Jan. and Feb. the report stated. However, as the economic effects of COVID-19 began to be felt in March, we found that growth began to slow.”
According to a market review report by the Global Infrastructure Hub, Saudi Arabia has announced a trillion-dollar pipeline of infrastructure projects aimed at diversifying the economy beyond oil and positioning the Kingdom as a global hub for investment and logistics. The development agenda has created opportunities in a range of new areas such as smart cities, tourism, and clean energy.
A view of the Saudi Arabia Infrastructure Q4 2020 presented in a Search Inside Report by the Market Research.com stated that Saudi Arabia’s construction sector will fall into recessionary territory during 2020 as the impact of the ongoing Covid-19pandemic weighs on short-term growth prospects in the sector. The long-term outlook remains strong, with efforts to diversify the economy away from oil offering opportunities for residential and non-residential projects and large-scale transport infrastructure.
A Fitch report expected the Saudi Arabia’s construction sector to expand quickly by global standards in the coming years, but trail faster growing GCC peers like Qatar and Oman. Within the Kingdom’s infrastructure mix, we expect economic diversification imperatives to support outperformance within the transport sector, while strong structural demand driven by a young population will incentives investment into the energy and utilities segment.
Saudi Arabia’s history is rich in supporting private and public partnerships in a multilateral framework, and in supporting investment in sustainable infrastructure.
To conclude, there is an urgent need for a global investment in sustainable infrastructure, and to integrate both the public and private sectors to develop measures to fill funding gaps, especially in developing countries.
As part of reaching such goal, the Kingdom established in 2015 the “Digital Goodness Platform” in partnership with UNDP to fund the first global resource that enables people to fund local efforts to achieve the Sustainable Development Goals.
Meanwhile, with a significant contribution made by Saudi Arabia, the G20 established has established a global infrastructure center that provides data, insights and best practices and unites the discourse on infrastructure.
On the global level, Saudi Arabia has always welcomed the facilitation and the creation of a global environment conducive to private investment in infrastructure, including public-private partnership initiatives, that was welcomed by Saudi Arabia. In addition to that, the development of financing infrastructure projects will be supported by Saudi Arabia as well.
SAUDI MEGA PROJECTS
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GROWTH PROSPECTS
The International Monetary Fund (IMF) raised its growth projection for the Saudi economy on the back of higher oil prices but retained its estimates for the region.
In its World Economic Outlook update, the IMF said the Saudi economy is expected to grow by 1.6 percent in 2018, up 0.5% on its October 2017 estimates.
The Saudi economy, the largest in the region, contracted in 2017, for the first time since 2009, when it dove into negative territory, due to the global financial crisis.
The kingdom has posted budget deficits in the past four fiscal years since oil prices began to plunge. Riyadh has introduced a series of measures to boost non-oil income including the introduction of a value-added tax (VAT) of 5% .
ANTI-CORRUPTION CRACKDOWN
Corruption, in all its kinds and forms, is a severe lesion that undermines societies and prevents their development and growth, as such, Saudi Arabia is determined to confront it in a fair and firm way so that the country enjoys the prosperity and development hoped for by every citizen. King Salman stated in a cabinet session that the Kingdom will continue along its path to protect integrity and combat and eliminate corruption, assign that the audit agencies must bolster their roles to ensure that public funds are protected and preserved. In early 2019, Saudi authorities announced an end to a high-profile anti-corruption probe that boosted state coffers by over $100 billion.