Latest news with #non-oilsector
Arab News
05-07-2025
- Business
- Arab News
2024: A year of fiscal discipline, economic growth
Saudi Arabia has released its 2024 fiscal results, highlighting how structural and fiscal reforms have strengthened economic resilience and improved the ability to navigate global challenges. These reforms have driven robust, non-oil sector growth, reduced unemployment to record lows, and kept inflation below global averages. The government remains committed to advancing fiscal policies that reinforce economic stability and ensure long-term sustainability. These measures have supported the Kingdom's development agenda while maintaining fiscal discipline, stimulating growth and preserving healthy public reserves and debt levels. In 2024, total revenues exceeded the approved budget by about 7.4 percent, thanks to stronger-than-expected oil and non-oil performance. Higher oil revenues were driven by performance-linked dividends, while non-oil revenues rose 14.1 percent over the budget, reflecting the expansion of non-oil activities and continued efforts to strengthen non-oil revenue streams. Total expenditure rose by about 9.9 percent over the approved budget, reflecting significant progress toward Vision 2030 goals and the execution of key projects. This increase was also driven by advancing some expenditure originally planned for future years, raising both operational and capital spending. The higher spending supported efforts to sustain and enhance social programs, mitigating the impact of economic changes on targeted beneficiaries. Additional measures focused on improving public service quality, enhancing quality of life, empowering the private sector and creating a more attractive investment climate. The actual fiscal deficit for 2024 was around SR116 billion ($31 billion), or 2.5 percent of gross domestic product, exceeding the approved deficit of SR79 billion (1.9 percent of GDP). By the end of 2024, public debt rose to nearly SR1.2 trillion, about 26.2 percent of GDP, up from SR1.1 trillion a year earlier. Government reserves stood at roughly SR390 billion. The General Authority for Statistics reported a decline in real GDP growth for 2024 compared to the budgeted forecast of 4.4 percent, mainly due to a 4.4 percent drop in oil sector activity. This reflects the Kingdom's voluntary production cuts under the OPEC+ framework and its commitment to energy market stability. Despite the decline in the oil sector, non-oil sectors outperformed projections, growing by 5.2 percent and driving overall real GDP growth of about 2 percent. This was supported by ongoing economic diversification and structural reforms that boosted activity. In 2024, the Kingdom recorded an inflation rate of 1.7 percent, well below the global average and the budgeted estimate of 2.2 percent. These results underscore the government's strong commitment to Vision 2030 through responsible fiscal policy, targeted investments and broad economic reforms. Despite a challenging global environment — marked by oil market volatility, inflationary pressures, and geopolitical uncertainty — the Saudi economy showed resilience, adaptability, and steady progress toward diversification. Structural and fiscal reforms enabled the government to navigate 2024's challenges, driving strong growth in non-oil activities. These reforms also lowered unemployment to a historic 7 percent in 2024 and kept inflation well below global trends. The government remains committed to forward-looking fiscal policies that support economic stability and ensure long-term sustainability. Maintaining low inflation, boosting non-oil revenues, and expanding non-oil activity have helped mitigate risks from declining oil revenues and price volatility. These achievements highlight the effectiveness of the reform agenda and the Kingdom's commitment to a diversified, sustainable economic future. With public debt at sustainable levels and reserves healthy, the Kingdom is well-positioned to advance its transformative agenda. Looking ahead, Saudi Arabia reaffirms its commitment to enhancing competitiveness, improving citizens' quality of life, empowering the private sector, and building a vibrant, inclusive economy. Through fiscal discipline, innovation, and strategic investment, the Kingdom aims to strengthen the foundations of long-term sustainability and prosperity — balancing growth with fiscal prudence under its expansionary spending policies. • Talat Zaki Hafiz is an economist and financial analyst. X: @TalatHafiz
Asharq Al-Awsat
04-07-2025
- Business
- Asharq Al-Awsat
Saudi Business and Job Growth Hit 14-Year High
Business conditions in Saudi Arabia's non-oil private sector improved notably in June, driven by a marked rise in customer demand and expanded production, according to the latest Riyad Bank Purchasing Managers' Index (PMI) data. New business volumes surged, fueling the fastest pace of employment growth since May 2011. This strong demand for workers pushed wage costs to record highs, adding pressure on overall expenses and contributing to a fresh increase in output prices. The headline PMI climbed to 57.2 in June from 55.8 in May - its highest level in three months and slightly above the long-term average of 56.9. The reading signaled a robust improvement in the health of the non-oil private sector economy. Companies reported another rise in new orders last month, with growth accelerating following a recent low in April. Many firms cited gaining new clients, alongside improved marketing efforts and stronger demand conditions. Domestic sales were the main driver of the increase, while export sales edged up slightly. Purchasing Activity Expands Production continued to expand through the end of Q2, although growth slowed to a 10-month low. Purchasing activity picked up sharply as companies sought to secure additional inputs to meet rising demand, with the pace of purchase growth reaching its fastest in two years. Employment growth accelerated as businesses rapidly expanded their workforce to keep pace with incoming orders, pushing hiring to the highest level since mid-2011. This strong recruitment trend, which began early in 2025, was largely driven by a rising need for skilled workers, prompting companies to increase salary offers. Consequently, overall wage costs rose at the fastest rate since the PMI survey started in 2009. Facing mounting cost pressures from higher raw material prices, firms raised their selling prices sharply in June , the biggest increase since late 2023, reversing declines recorded in two of the previous three months. This price hike largely reflected the passing of higher operating costs onto customers, although some companies opted for competitive pricing strategies by cutting prices. Resilient Economic Outlook Looking ahead, non-oil private sector firms remained confident about business activity over the next 12 months. Optimism hit a two-year high, supported by resilient domestic economic conditions, strong demand, and improved sales. Supply-side conditions also showed positive momentum, with another strong improvement in supplier performance. Dr. Naif Alghaith, Chief Economist at Riyad Bank, said: 'Future expectations among non-oil companies remain very positive. Business confidence reached its highest level in two years, underpinned by strong order inflows and improving local economic conditions.' He added: 'However, cost pressures became more pronounced in June, with wage growth hitting record levels as companies compete to retain talent. Purchasing prices also rose at the fastest pace since February, partly driven by increased demand and geopolitical risks. Despite these challenges, companies broadly raised selling prices to recover from May's declines, reflecting an improved ability to pass higher costs onto customers.'
Argaam
29-06-2025
- Business
- Argaam
Saudi non-oil sector resilient amid challenges: World Bank
Safaa El Tayeb El-Kogali, the World Bank's Country Director for the GCC Countries, said that the outlook for Saudi Arabia's economy in 2025 is broadly positive, with growth projected at 2.8%, gradually strengthening to 4.6% by 2027. This anticipated increase is expected to be supported by the phase out of OPEC+ production cuts, which will benefit the oil sector, alongside continued strength in non-oil activities, she added, in an interview with Argaam. The performance of Saudi Arabia's non-oil sector in 2024 stands out as a key highlight. While the oil sector faced headwinds from global production dynamics, the non-oil economy maintained strong growth at 4.3%. This resilience reflects the progress made in diversifying the economic base and enhancing the role of services and domestic consumption, said El-Kogali. She added that the non-oil sector will likely remain a key driver of growth, buoyed by government initiatives to enhance infrastructure, attract investment, and promote private sector development. She also indicated that the fiscal deficit widened in 2024, partly due to sustained public expenditure and fluctuating oil revenues, noting that, nonetheless, inflation remained low and stable, helping to maintain consumer purchasing power and macroeconomic stability. According to El-Kogali, the private sector is expected to become the main engine of sustainable growth in Saudi Arabia. To enable this, the government plays a critical role in creating the right conditions—through investment in infrastructure, human capital, and institutional reforms. The World Bank findings indicate that government consumption spending has a positive but relatively modest effect on non-hydrocarbon output, with fiscal multipliers ranging between 0.1 and 0.45 across GCC countries. These fiscal multipliers tend to be higher during economic downturns, highlighting the role of government spending as a stabilizing force when growth slows, said the top official. On the other hand, government investment spending shows a smaller immediate impact, with a marginal increase in potential output estimated at around 0.07% for each one-percentage-point rise in investment, which is in line with literature, she added. However, El-Kogali warned that Saudi Arabia faces both short-term and long-term challenges to sustaining growth, saying that, in the short term, global trade and economic uncertainty, fluctuating oil prices and production levels, and the potential spillovers from regional conflicts pose key risks to stability and growth momentum. Meanwhile, over the longer term, structural vulnerabilities remain, mainly the continued dependence on hydrocarbon revenues, and the persistent decline in productivity, which poses a challenge to competitiveness and economic diversification. Addressing these issues through targeted reforms, innovation, and skills development will be essential to achieving the Kingdom's long-term growth objectives, she added.
Arab News
28-06-2025
- Business
- Arab News
IMF highlights Saudi Arabia's economic, fiscal progress
As part of the 2025 Article IV consultation with Saudi Arabia, the International Monetary Fund released a concluding statement summarizing its preliminary findings following the recent mission to the Kingdom. The IMF commended the significant progress in Saudi Arabia's ambitious economic transformation, highlighting the impact of far-reaching fiscal and macroeconomic policies, along with comprehensive reforms to fiscal and business regulations, which have driven strong growth in the non-oil sector. It emphasized the Kingdom's strong economic and financial position, supported by the continued success of its economic plans and fiscal policies in maintaining financial stability and fostering growth — despite ongoing geopolitical tensions, trade disruptions, and global uncertainty. The IMF also highlighted that Saudi Arabia's economy has demonstrated strong resilience to shocks, with expanding non-oil economic activities, contained inflation, and unemployment at record-low levels. Although lower oil revenues and investment-related imports have resulted in twin deficits, external and fiscal buffers remain strong. Maintaining a higher-than-budgeted fiscal stance in 2025 is appropriate to avoid procyclical tightening that could amplify the growth impact of lower oil prices. Managing robust credit growth and resulting funding pressures will be critical to safeguarding systemic financial stability. Given heightened global uncertainty, sustained momentum on structural reforms remains essential to support non-oil growth and advance economic diversification. The IMF's statement noted that non-oil real gross domestic product grew by 4.2 percent in 2024, primarily driven by private consumption and non-oil private investment, with retail, hospitality, and construction leading the growth. The labor market maintained strong momentum, driving unemployment to a historic low of 7 percent in 2024, surpassing the original Vision 2030 target, which has since been revised down to 5 percent. The labor market showed broad-based improvements, with youth and female unemployment rates halving over the past four years. Despite a slight rise to 2.3 percent in April 2025, headline inflation remains low, supported by elevated real interest rates. The current account shifted to a narrow deficit, moving from a surplus of 2.9 percent of GDP in 2023 to a deficit of 0.5 percent in 2024. This mainly reflects a decline in oil export proceeds, higher imports of machinery and equipment, and stronger remittance outflows — factors that more than offset a surge in tourism inflows. The current account deficit has been financed through external borrowing and reduced FX asset accumulation. As a result, the Saudi Central Bank's net foreign asset holdings stabilized at $415 billion by end-2024 — equivalent to 15 months of imports and 187 percent of the IMF's reserve adequacy metric. Regarding the Kingdom's economic outlook and risks, the IMF highlighted that robust domestic demand, including government-led projects, will continue to drive growth despite heightened global uncertainty and a weakened commodity price outlook. Non-oil real GDP growth is projected at 3.4 percent in 2025, about 0.8 percentage points lower than in 2024. This reflects ongoing Vision 2030 projects through public and private investment, as well as strong credit growth, which will help sustain domestic demand and mitigate the impact of lower oil prices. The direct impact of rising global trade tensions is limited, as oil products — making up 78 percent of Saudi Arabia's goods exports to the US in 2024 — are exempt from US tariffs, while non-oil exports to the US account for only 3.4 percent of Saudi Arabia's total non-oil exports. Inflation is expected to remain anchored around 2 percent, supported by a credible peg to the US dollar, domestic subsidies, and an elastic supply of expatriate labor, despite a projected moderate positive output gap over the medium term. Imported inflation from increased tariffs worldwide is expected to remain contained. Weaker oil demand, driven by heightened uncertainty, escalating global trade tensions, and deepening geoeconomic fragmentation, could dampen oil proceeds. I believe the IMF has recognized the unprecedented economic transformation underway in Saudi Arabia, praising the country's strong financial resources and the significant reforms implemented across various sectors, including public finance. It also highlighted the Kingdom's strong economic and financial position, supported by steady economic gains and sound fiscal strategies designed to preserve stability amid ongoing geopolitical tensions, trade disruptions, and global uncertainty. Despite public debt reaching 26.2 percent of GDP, the IMF noted it remains low by international standards, reflecting the Kingdom's solid fiscal performance and preparedness for potential future shocks. Recent investment initiatives — including the regulation enacted in February 2025 — are set to significantly enhance market liquidity and broaden shareholder participation in Saudi capital markets. In conclusion, I believe these economic and financial achievements highlighted in the IMF's preliminary findings underscore the far-reaching impact of ongoing reforms, reaffirming Saudi Arabia's sustained progress in expanding opportunities for its citizens and bolstering long-term economic resilience. • Talat Zaki Hafiz is an economist and financial analyst. X: @TalatHafiz
Khaleej Times
18-06-2025
- Business
- Khaleej Times
UAE's assets, domestic stability provide cushion against geopolitical tensions
The UAE's economy will grow by about four per cent over four years on the back of 'buoyant' non-oil sector activity and increasing oil production, according to S&P Global Ratings. Maintaining 'AA/A-1+' sovereign credit rating with a stable outlook, the global rating agency said Emirates' economy will remain 'resilient' and regional geopolitical tensions will 'have a limited effect on the UAE, given its substantial assets and record of domestic stability". The Iran-Israel military conflict has been, so far, limited to two countries, and Gulf countries — the UAE and Saudi Arabia — are calling for restraint and ending the conflict, which entered into its sixth day on Wednesday. It added that the government's consolidated net asset position provides a buffer to counteract the effects of oil price swings and geopolitical tensions in the Gulf region on economic growth, government revenue, and the external account. In addition to the UAE's significant economic wealth and fiscal buffers, authorities have actively adjusted policymaking to address risks. Earlier this month, the World Bank raised the UAE's GDP growth forecast for 2025 by 0.6 percentage points to 4.6 per cent, citing robust expansion in both hydrocarbon and non-oil sectors. 'For example, they have maintained expenditure restraint and implemented measures to help diversify the economy and government revenue away from the hydrocarbon sector. We expect the general government will run fiscal surpluses averaging 3.2 per cent of GDP over our forecast horizon to 2028, assuming Brent oil prices of $60 per barrel in 2025 and $65 a barrel through 2028,' said S&P analysts. However, government debt will remain stable at about 28 per cent of GDP over the next four years as the federal government and emirates such as Abu Dhabi plan to issue local currency debt to develop domestic capital markets. The UAE has also made significant strides toward diversifying its economy so that non-oil sectors now comprise about 75 per cent of the GDP. 'Over the past four years, real non-oil growth has averaged around six per cent, bolstered by strong activity in the services sectors, including construction, financial services, transport and storage, hospitality, and manufacturing, which together account for about 35 per cent of UAE's real GDP.' S&P expects oil production to increase as Opec+ quotas are gradually lifted. In June, Opec+ announced an acceleration in production — its third in the last three months. July will see an additional 400,000 barrels per day. It sees crude oil production to reach about 3.5 million barrels a day in 2028, from slightly less than 3 million in 2024.
