Saudi Arabia is experiencing a remarkable economic transformation, according to a recent report by the International Monetary Fund (IMF). The Kingdom’s strategic government policies and successful diversification efforts are driving this unprecedented change, creating a wealth of opportunities for investors worldwide.
Driving Growth Through Diversification and Reform
The IMF report highlights Saudi Arabia’s growing domestic demand, robust financial reforms, and progressive environmental policies as key strengths underpinning its economic evolution. These findings align with recent data from the Organisation for Economic Co-operation and Development, which revealed that Saudi Arabia’s economic growth surpassed the G20 average in the year’s first quarter.
Looking ahead, the IMF projects Saudi Arabia’s GDP growth to accelerate to approximately 4.5% by 2025, with a stable rate of 3.5% annually in the medium term. Non-oil sector growth is expected to reach 3.5% in 2024, with further increases anticipated thereafter. While oil output is projected to decline by 4.6% in 2024, it is set to rebound by 5.1% in 2025 as oil production gradually returns to 10 million barrels per day.
The IMF commends the Saudi government’s efforts to diversify the economy, noting that these initiatives are beginning to yield positive results. Emphasizing the importance of sustaining non-oil growth momentum, the report also underscores the need to maintain financial sector stability and ensure long-term economic equity.
Enhancing the Business Environment and Attracting Investment
Saudi Arabia’s commitment to improving its business environment and attracting foreign investment is evident in its significant rise in the IMD’s World Competitiveness ranking, where it climbed 15 positions to 17th place globally in just two years. The IMF praises ongoing reforms aimed at bolstering human capital, increasing female labor force participation, and advancing digital transformation and AI readiness.
Efforts to streamline fees, enhance access to land and finance, and strengthen governance are vital in promoting private sector growth and attracting foreign direct investment (FDI). These measures are expected to contribute significantly to productivity growth and economic stability.
Commitment to Sustainability and Financial Strength
The IMF also recognizes Saudi Arabia’s strong financial sector, with bank credit growth outpacing deposit growth, projected to remain around 10% in 2024. The Saudi Arabian Monetary Authority (SAMA) plays a crucial role in modernizing regulatory frameworks to ensure financial stability.
On the environmental front, Saudi Arabia remains dedicated to achieving net zero emissions by 2060. The Kingdom is investing in renewable energy, energy efficiency, clean hydrogen, and carbon capture technologies. The IMF suggests that eliminating energy subsidies could further incentivize conservation and boost returns on renewable energy investments.
Furthermore, expanding the green finance portfolio, including through the Green Finance framework and an inaugural sovereign green bond issuance, is crucial for attracting private capital and supporting sustainable development.
With its strategic reforms and commitment to sustainability, Saudi Arabia is poised to become a leading destination for investors seeking growth opportunities in the Middle East.
