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Saudi FDI Balance Records 6.1% Growth in 1st Quarter of 2024

The Saudi capital, Riyadh (Asharq Al-Awsat)
The Saudi capital, Riyadh (Asharq Al-Awsat)
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Saudi FDI Balance Records 6.1% Growth in 1st Quarter of 2024

The Saudi capital, Riyadh (Asharq Al-Awsat)
The Saudi capital, Riyadh (Asharq Al-Awsat)

The foreign direct investment (FDI) balance in Saudi Arabia recorded a growth of 6.1 percent by the end of the first quarter of 2024, compared to the same period last year, highlighting the confidence of foreign investors in the Kingdom’s investment environment.

According to a recent report issued by the Ministry of Investment, FDI flows achieved a growth of 0.6 percent during the first quarter of this year, compared to the same period in 2023.

The report revealed that 2,728 licenses were issued by the Ministry in the second quarter of 2024, on an annual basis, after excluding licenses related to the campaign to combat violators of the Commercial Concealment Law.

Total fixed capital formation achieved a growth of 7.9 percent during the first quarter of 2024, compared to the same period in 2023. This is attributed to the increase in both fixed capital formation of the government and non-government sectors by 17.8 percent and 7.2 percent respectively during the same period.

The report revealed positive growth in the rates of most economic activities in the first quarter of 2024, on an annual basis, as wholesale and retail trade activity, restaurants and hotels achieved the highest growth rate of 5.9 percent, followed by transportation, storage and communications at 5 percent.

Collective, social and personal services, as well as agriculture, forestry and fisheries also saw a growth of 4.5 percent and 4.4 percent, respectively.

The Ministry of Investment, in cooperation with the Thai Investment Board and the Embassy of Thailand in Saudi Arabia, recently organized the Saudi-Thai Investment Forum in Riyadh, in the presence of Minister of Investment Eng. Khaled Al-Falih and Thai Minister of Foreign Affairs Maris Sangiampongsa. A number of officials and CEOs of major companies and representatives of the private sector from both the countries participated in the event.

During the forum, the officials announced the opening of an office for the Thai Investment Council in Riyadh to confirm the strategic partnership, strengthen economic relations between the Kingdom and Thailand, and expand trade exchange.

The event also witnessed the signing of 11 agreements and memorandums of understanding in several fields, including agriculture, food, tourism, infrastructure, and energy.

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S&P Expects Saudi Issuances to Continue Domestically, Internationally Driven by Vision 2030

A view of the Saudi capital, Riyadh. (SPA)
A view of the Saudi capital, Riyadh. (SPA)
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S&P Expects Saudi Issuances to Continue Domestically, Internationally Driven by Vision 2030

A view of the Saudi capital, Riyadh. (SPA)
A view of the Saudi capital, Riyadh. (SPA)

S&P Global Ratings anticipates that Saudi issuers will continue to tap local and international capital markets to finance projects under Saudi Arabia’s Vision 2030. The agency expects debt levels to remain manageable, with private sector debt-to-GDP ratios staying below 100% over the next 12 to 24 months.

According to S&P’s report, “Saudi Capital Market Overview: Rising Issuance Levels Are Just the Start”, Saudi companies have dominated issuance activity in recent years. Over the past five years, Saudi entities, including government-related entities, have accounted for roughly two-thirds of non-governmental US dollar-denominated issuances. However, the report predicted that banks will play an increasingly significant role in the future.

The report noted that Saudi issuers have raised over $130 billion in US dollar-denominated issuances over the last five years. This adds to $144 billion raised domestically in Saudi riyals during the same period, driven by Vision 2030 initiatives.

While the government accounts for about 60% of these issuances, the Kingdom’s Vision 2030 has created expansive opportunities in the non-oil economy and banking system, paving the way for future growth, the report underlined.

S&P highlighted the development of Saudi Arabia’s mortgage-backed securities market as a key factor to watch over the next two years. As of the end of September 2024, Saudi banks held more than $175 billion in mortgage financing, most of which carried fixed interest rates but were funded through short-term resources, primarily local deposits.

With declining interest rates, some of these mortgages could re-enter circulation, enabling banks to sell them in the secondary market without incurring losses. This would allow banks to offload mortgage financing from their balance sheets, provided legal challenges surrounding the mortgage-backed securities issuance are resolved or mitigated sufficiently to attract local and international investor interest.

According to the report, developing the mortgage-backed securities market could significantly enhance banks’ financial capacity, enabling them to better support the implementation of Vision 2030. This could occur through existing infrastructure, such as the Saudi Real Estate Refinance Company, or via direct issuances in the capital markets.