Saudi Arabia has reached a significant milestone in its economic journey, with the non-oil sector contributing 50% to the nation’s GDP for the very first time. This marks a pivotal moment in the country’s strategic shift away from its traditional reliance on fossil fuels.
According to the latest government figures, the non-oil sector experienced a real GDP growth rate of approximately 4.4%, valuing the sector at around 1.7 trillion Saudi riyals, which is equivalent to about $453 billion. This impressive growth aligns with the ambitious goals outlined in Vision 2030, Saudi Arabia’s comprehensive reform agenda focused on economic diversification.
Shifting Economic Paradigms
Economist Nasser Saidi, who previously served as Lebanon’s minister of economy and trade, highlights a critical challenge: the oil and gas industry, while capital-intensive, does not generate sufficient job opportunities to accommodate Saudi Arabia’s young and educated workforce. Notably, around 30% of the Saudi population is under the age of 30.
In response, the Saudi government has implemented a range of incentives to bolster both the services and manufacturing sectors. The non-oil sector’s growth has been significantly fueled by private consumption in areas such as entertainment, hospitality, and tourism, collectively accounting for 40% of last year’s economic activity.
Tourism: A New Economic Powerhouse
The tourism industry has emerged as a particularly robust area, drawing in $13 billion in private investments and attracting 27 million international visitors, alongside 77 million domestic travelers last year. This surge in tourism has contributed significantly to the sector’s overall success.
Despite these remarkable achievements, the kingdom faced a 4.3% decline in real GDP in 2023, primarily due to a decrease in oil sector activity. This downturn was attributed to voluntary production cuts by OPEC countries amidst market uncertainties and increased production outside the organization. Nevertheless, Saudi Arabia’s wealth remains heavily invested in its natural resources, with mining and quarrying making up one-third of the total non-oil output last year. Beyond these sectors, manufacturing accounted for over 15% of real GDP, while real estate and construction contributed 14%.
As Saudi Arabia continues to diversify its economy and reduce its dependence on oil, the kingdom is poised to offer abundant opportunities for foreign investors and businesses eager to tap into this thriving market.
