Saudi Arabia economy

Moody’s forecasts economic growth for Saudi Arabia

Moody’s, the global credit rating agency, recently upgraded Saudi Arabia’s growth forecast for 2023 and 2024, citing the country’s durable non-oil sector as the driving force behind the growth.

The new forecast predicts a growth rate of 2.5% in 2023, up from the previous estimate of 1.7% that was announced in November 2021. The forecast for 2024 has also been raised from 2.6% to 3%. The growth forecast for 2022 was also revised upward, from 7.4% to 8.7%.

Economic growth boost by 3%

The Moody’s report comes as Riyad Capital in its latest report said Saudi Arabia’s economic increase is expected to be around 3 percent in 2023, backed by a robust non-oil sector. The Riyad Capital report forecasts the output from this part of the economy will rise by 5 percent this year, driven by a sturdy fiscal policy geared towards increasing investment spending. The oil sector is also expected to continue its growth trajectory estimated at 1.2 percent this year, noted the report. The inflation rate is expected to drop gradually across this year to reach 3.1 percent, down from 3.4 percent recorded in January 2023, noted Riyad Capital.

Alexander Perjessy, Vice-President and Senior Credit Officer at Moody’s, spoke to Arab News about the upward revision of growth forecasts. He shared:

“The upward revision of our growth forecasts reflects greater confidence that the non-hydrocarbon sector growth momentum seen during the past two years will be maintained during 2023-24, supported by progress on the government-sponsored large-scale economic diversification projects and a wide range of government initiatives aimed at stimulating growth in the domestic entertainment and tourism sector, as well as education, healthcare, and affordable housing. The growth momentum will also benefit from the recently implemented structural reforms aimed at improving the ease of starting and doing business, enforcing contracts, and resolving commercial disputes and bankruptcies. Last but not least, consumers will remain shielded from elevated energy prices through the government cap on domestic transportation fuel prices and utility tariffs.”

The Saudi Arabian government has been implementing a range of economic reforms aimed at diversifying the economy and reducing its dependence on oil exports. This includes the Vision 2030 program, which seeks to transform the country’s economy by promoting private sector growth, attracting foreign investment, and increasing the role of women in the workforce. The program also aims to develop new industries such as tourism and entertainment, and to modernize the country’s infrastructure.

Moody’s report is a positive sign for the Saudi Arabian economy, which has been hit hard by the COVID-19 pandemic and the drop in oil prices. The pandemic led to a significant decrease in global demand for oil, which is Saudi Arabia’s main export.

The country responded by cutting oil production to support global prices, but this had a negative impact on government revenues. The government was forced to implement austerity measures, including cuts to subsidies and public sector salaries.

Signs of recovery

However, the country’s economy has shown signs of recovery in recent months, with the non-oil sector driving growth. The government has also announced a number of new projects aimed at stimulating economic activity, such as the $5 billion Qiddiya entertainment project, which is set to open in 2023. The project includes theme parks, water parks, and sports facilities, and is expected to create thousands of jobs.

The outlook for the Saudi Arabian economy is also being boosted by the global economic recovery, with many countries experiencing strong growth in 2022 and 2023. Moody’s anticipates that the US’s final slowdown in tightening monetary policy will help level, or even increase, capital flows to emerging-market nations.

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