Saudi Arabia Expected to Become More Attractive after Interest Rate Cuts

The kingdom aims to achieve an annual foreign direct investment inflow of over $100 billion (Asharq Al-Awsat)

The US Federal Reserve cut interest rates for the first time in over four years at its meeting on Wednesday, a dramatic shift after more than two years of high rates helped tame inflation but that also made borrowing painfully expensive for consumers.
As the Fed and other central banks around the world lower rates, emerging markets could benefit from this shift in policy.
Historically, lower rates in advanced economies make emerging markets more attractive by encouraging capital inflows, boosting economic growth, and supporting investments in key sectors like infrastructure and technology.
Rate cuts usually reduce borrowing costs, which can help emerging market governments and companies by making it cheaper to access capital for expansion and easing debt repayment pressures.
Additionally, low rates in places like the US and EU often drive global investors to seek higher returns in faster-growing markets, increasing demand for emerging market assets.
Emerging economies can also benefit from greater currency stability as capital inflows strengthen their balance of payments, which helps stabilize inflation and make essential imports like food and energy more affordable.
Lower rates can also support domestic spending, boosting demand for local goods and services.
Saudi Arabia is emerging as one of the world’s most attractive markets as global interest rates decline. The kingdom’s dynamic economy and ongoing reforms position it well to take advantage of cheaper borrowing costs and support long-term sustainable growth.
According to Arun Leslie John, Chief Market Analyst at Century Financial, the outlook for Saudi Arabia is very positive compared to global trends, driven by strong growth in non-oil sectors and government efforts to attract foreign investment.
John told Asharq Al-Awsat that Saudi Arabia and other Gulf countries, whose currencies are tied to the US dollar, are expected to benefit from upcoming rate cuts, which will lower financing costs, boost liquidity, and encourage both spending and investment in the region.
These favorable conditions could speed up economic growth, boost stock prices, and make Saudi Arabia an even more attractive investment destination, he said.
Saudi Arabia aims to attract over $100 billion in annual Foreign Direct Investment (FDI) by 2030, a goal that seems achievable with the current easing of monetary policy, John added.
John also expects Saudi banks to benefit from lower interest rates by the end of 2024, which will be crucial for supporting lending and the government’s diversification plans.