ECONOMY

NON-OIL SECTOR MAKES UP HALF OF SAUDI’S ECONOMY IN 2023

Non-oil activities in Saudi Arabia reached a record 50% of the country's real GDP in 2023, the highest level ever recorded.

Data from the General Authority for Statistics (GASTAT) obtained by the Ministry of Economy and Planning signifies a robust non-oil economy valued at SAR 1.7 trillion (approximately USD 453 billion) at constant prices. The surge has been underpinned by sustained growth in investment, consumer spending, and exports. It also speaks to the regulatory and economic reforms that have propelled the non-oil sector and encouraged heavy investment in the G20 economy from domestic, regional, and international private sector entities.

The strong GDP contribution of non-oil sectors can be attributed to an increase in private sector investment over the past two years, boasting an impressive growth rate of 57%.This upswing propelled private investment to a record SAR 959 billion (USD 254 billion) in 2023, according to the ministry.

Among the standout performers, arts and entertainment activities demonstrated exceptional growth, soaring by 106% between 2021 and 2022. Additionally, sectors such as accommodation, food services and transportation, and storage grew by an impressive 77% and 29%, respectively.

The diversification and momentum witnessed across various sectors in 2023 had been notable. Social services, which encompass healthcare, education, and entertainment, saw a 10.8% increase, followed by transportation and communication (3.7%) and trade, restaurants, and hotels (7%).

Real service exports, primarily propelled by tourist spending, witnessed an astounding growth rate of 319% over the past two years. This surge reflects Saudi Arabia's transformation into a global tourism and entertainment hub, further driving economic diversification and growth.

VISION 2030 GOALS

These developments align seamlessly with the objectives outlined in Saudi Vision 2030, which seeks to foster a thriving economy through diversification. They underscore the kingdom's success in implementing pivotal programmes and projects outlined in the strategy, nurturing the development of new sectors that contribute to accelerated growth rates.

Total revenues for the government during the year 2023 reached more than SAR 1.21 trillion, with non-oil revenues contributing SAR 457 billion and the remainder by oil sector, according to the Ministry of Finance.

The net value of foreign direct investment (FDI) flows in the kingdom reached SAR 13 billion in the fourth quarter of 2023, a 16% increase compared to the previous quarter, GASTAT data shows.

The economic growth has also had a positive impact on the country’s labour market. According to GASTAT, total unemployment rate (for Saudis and non-Saudis) fell to 4.4% in the fourth quarter of last year from the third quarter by 0.7 percentage points, where it was 5.1%. The unemployment rate for Saudis also decreased to 7.7% in Q4 2023 compared to 8.6% in Q3 2023. Additionally, the unemployment rate for Saudi females during Q4 2023 decreased to 13.7% compared to 16.3% in the previous quarter, while the unemployment rate for Saudi males remained stable at 4.6% in Q4 2023.

During the fourth quarter of 2023, indicators showed a drop in total participation rate in labour force (for Saudis and non-Saudis) compared to Q3 2023, reaching 60.4%. Moreover, the participation rate in labour force for Saudis dropped to 51.3%, compared to the previous quarter.

VISION 2030 GOALS

Given the strength of the overall economy, S&P Global Rating reaffirmed the kingdom’s foreign and local currency sovereign credit ratings at 'A/A-1' with a stable outlook. The agency's report attributes this rating affirmation to the steadfast pursuit of the kingdom's economic and social reform agenda in recent years, anticipating a bolstering of economic resilience and continued support for the development of the non-oil sector and fiscal revenues.

Driven by an uptick in investment in the non-oil sector and robust consumer spending within the kingdom, S&P Global Rating forecasts a medium-term average GDP growth of 3.3%. The ratings agency also predicts fiscal deficits of approximately 2% of GDP over the period spanning 2024 to 2027, in anticipation of substantial growth in construction for Saudi Vision 2030 initiatives and a thriving service sector buoyed by consumer demand and an expanding female workforce.

S&P commended Saudi Arabia for embarking on a significant and swift economic and social transformation programme under the ambit of Saudi Vision 2030. With an eye towards the year 2030, S&P Global Rating expects an acceleration in investment projects aimed at establishing novel industries, including tourism, thus diversifying the Saudi economy away from its historical dependence on the upstream hydrocarbon sector.