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Standard & Poor’s Expects Saudi Economy to Grow by 3.4%

Inflation in the Kingdom remains under control and is expected to reach 2.7% in 2023, according to S&P Global. (SPA)
Inflation in the Kingdom remains under control and is expected to reach 2.7% in 2023, according to S&P Global. (SPA)
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Standard & Poor’s Expects Saudi Economy to Grow by 3.4%

Inflation in the Kingdom remains under control and is expected to reach 2.7% in 2023, according to S&P Global. (SPA)
Inflation in the Kingdom remains under control and is expected to reach 2.7% in 2023, according to S&P Global. (SPA)

Standard & Poor’s (S&P) maintained its credit rating for Saudi Arabia in local and foreign currencies at A/A-1 with a stable outlook, which it attributed to its expectations of the continuation of the government’s reform agenda in developing the non-oil sector, in addition to efforts to manage public finances and preserve a balanced level of public debt.

The agency said that the Kingdom would likely achieve annual growth in the next three years at a rate of 3.4 percent, supported by the expected high demand for oil and the noticeable growth in the non-oil sector. It added that inflation in Saudi Arabia has remained largely under control, noting that it was expected to reach 2.7 percent in 2023, and an average 2.3 percent in 2024-2026.

In its report, Standard & Poor’s said its rating is based on the country’s sustainable reform momentum in recent years, which included measures to enhance non-oil economic growth, supported by non-oil investments led by the Public Investment Fund (PIF), the expansion the non-oil tax base, and the large social liberalization.

“Reforms in the past few years, including measures to drive non-oil economic growth and widen the non-oil tax base, alongside significant social liberalization, should continue to improve Saudi Arabia’s economic and fiscal profile,” said S&P Global in the report.

The agency, however, said the Kingdom is expected to achieve a 0.2 percent growth in its gross domestic product for the current year, as a result of global economic conditions, including a slow recovery in China, which led to weak global oil demand in late 2022 and early 2023. On the other hand, it stressed that this decline in production is partially compensated for by the strong growth of non-oil GDP.

The S&P Global report pointed to Saudi Arabia’s continued efforts in recent years and its structural improvements that supported the sustainable development of the non-oil sector. It added that the Kingdom’s prudent management of public finances and maintaining a balanced public debt level have also contributed to this rating.

Standard & Poor’s expected the budget to return to achieving surpluses averaging 1 percent of GDP between 2024 and 2026 after a deficit in 2023, due to the reduction in oil production. It also said the total general government debt is likely to reach an average of 25 percent of GDP in 2023-2026.

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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)

Telecommunications companies listed on the Saudi Stock Exchange (Tadawul) achieved a 12.46 percent growth in their net profits, which reached SAR 4.07 billion ($1.09 billion) during the second quarter of 2024, compared to SAR 3.62 billion ($965 million) during the same period last year.

They also recorded a 4.76 percent growth in revenues during the same quarter, after achieving sales worth more than SAR 26.18 billion ($7 billion), compared to SAR 24.99 billion ($6.66 billion) in the same quarter of 2023.

The growth in the revenues and net profitability is the result of several factors, including the increase in sales volume and revenues, especially in the business sector and fifth generation services, as well as the decrease in operating expenses and the focus on improving operational efficiency, controlling costs, and moving towards investment in infrastructure.

The sector comprises four companies, three of which conclude their fiscal year in December: Saudi Telecom Company (STC), Mobily, and Zain Saudi Arabia. The fiscal year of Etihad Atheeb Telecommunications Company (GO) ends on March 31.

According to its financial results announced on Tadawul, Etihad Etisalat Company (Mobily) achieved a 33 percent growth rate of profits, bringing its profits to SAR 661 million by the end of the second quarter of 2024, compared to SAR 497 million during the same period in 2023. The company also achieved a 4.59 percent growth in revenues to reach SAR 4.47 billion, compared to SAR 4.27 billion in the same quarter of last year.

The Saudi Telecom Company achieved the highest net profits among the sector’s companies, at about SAR 3.304 billion in the second quarter of 2024, compared to SAR 3.008 billion in the same quarter of 2023. The company registered a growth of 4.52 percent in revenues.

On the other hand, the revenues of the Saudi Mobile Telecommunications Company (Zain Saudi Arabia) increased by about 6.69 percent, as it recorded SAR 2.55 billion during the second quarter of 2024, compared to SAR 2.39 billion in the same period last year.

Commenting on the quarterly results of the sector’s companies, and the varying net profits, the head of asset management at Rassanah Capital, Thamer Al-Saeed, told Asharq Al-Awsat that the Saudi Telecom Company remains the sector leader in terms of customer base expansion.

He also noted the continued efforts of Mobily and Zain to offer many diverse products and other services.

Financial advisor at the Arab Trader Mohammed Al-Maymouni said the financial results of telecom sector companies have maintained a steady growth, up to 12 percent, adding that Mobily witnessed strong progress compared to the rest of the companies, despite the great competition which affected its revenues.

He added that Zain was moving at a good pace and its revenues have improved during the second quarter of 2024. However, its profits were affected by an increase in the financing cost by SAR 26.5 million riyals and a rise in interest, while net income declined significantly compared to the previous year, during which the company made exceptional returns.