Saudi Arabia is poised for a remarkable economic journey, with growth projections of 4.4 percent in 2024, as highlighted by Aljazira Capital in their comprehensive year-end report. This promising outlook aligns closely with the Kingdom’s Finance Ministry’s estimates, while Moody’s offers an even more optimistic forecast of 4.6 percent growth for the same period.
Driving Forces Behind Economic Growth
The anticipated economic expansion is largely attributed to the Kingdom’s ambitious megaprojects and the strategic initiatives under Vision 2030. These elements, coupled with robust government spending and active private sector participation, are expected to be the key drivers of growth. Furthermore, an increase in consumer spending, a reduction in unemployment rates, and a thriving non-oil private sector are indicators of a vibrant economic environment. Effective inflation management further bolsters this positive outlook.
Aljazira Capital emphasized that the growth in the private sector, spurred by Vision 2030 programs, will compensate for weaker oil revenues, leading to a 4.4 percent GDP expansion in fiscal year 2024. Additionally, anticipated interest rate cuts may enhance liquidity, attracting foreign investments, and potentially contributing to a 10 percent rise in the main Saudi stock market next year.
Global and Local Economic Influences
The report outlines several global and local economic factors fostering this optimistic forecast. With interest rates peaking in advanced economies and inflation rates declining, a global economic slowdown is expected to achieve a soft landing in 2024, avoiding a recession. The potential for the US Federal Reserve to reduce interest rates by 100 basis points this year could prompt similar actions from the Saudi Central Bank, SAMA, due to the Saudi riyal’s peg to the US dollar, possibly resulting in a repo rate reduction to 5 percent in 2024.
Despite global economic challenges affecting oil demand and concerns over supply excesses in 2023, Aljazira Capital maintains that Brent crude oil prices will likely stay above $80 per barrel in 2024. The strategic policies of OPEC+ will be pivotal in navigating the oil market amidst increased US supply concerns.
Positive Market Outlook and Sector Opportunities
Analysts project that the Tadawul All Share Index (TASI) will experience growth in 2024, driven by corporate profit increases and greater market liquidity. The report suggests an earnings per share (EPS) of SR691 ($184) and a fair value of 13,123 points for TASI, indicating a potential 13.1 percent upside from current levels.
The research document also highlights promising prospects for the banking sector, alongside specific retail, technology, and application stocks. Additionally, sectors related to communication services and tourism are expected to perform well, presenting lucrative opportunities for investors.
