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

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Saudi Arabia's Digital Advertising Boom: Addressing Economic Leakage, Boosting Local Content

A digital advertising event recently held in Riyadh (Asharq Al-Awsat)
A digital advertising event recently held in Riyadh (Asharq Al-Awsat)
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Saudi Arabia's Digital Advertising Boom: Addressing Economic Leakage, Boosting Local Content

A digital advertising event recently held in Riyadh (Asharq Al-Awsat)
A digital advertising event recently held in Riyadh (Asharq Al-Awsat)

Saudi Arabia’s digital advertising sector is experiencing rapid growth, but a significant portion of its revenues is leaking to foreign platforms. To maximize the impact on the national economy, experts are calling for strategies to curb this outflow and redirect it to local channels.

The importance of retaining digital ad revenues lies in the substantial size of this market. It is estimated that approximately $1 billion in ad spent is lost annually to foreign platforms, representing a considerable loss to Saudi Arabia’s economy.

Dr. Ebada Al-Abbad, CEO of Marketing and Communications at Tadafuq, a Saudi digital advertising network, told Asharq Al-Awsat that the problem stems from the fact that although advertisers, products, and audiences are often local, the largest share of financial gains goes to foreign platforms. He estimated that 70-80% of the $1.5 billion spent on digital advertising in Saudi Arabia in 2022 went to global platforms such as Google and Facebook. This results in the national economy losing nearly $1 billion annually from this sector alone.

Al-Abbad noted that government agencies in Saudi Arabia also contribute to the outflow. He explained that public sector spending on digital advertising, intended to raise awareness among citizens and residents, frequently ends up on foreign platforms. Government spending makes up about 20-25% of the total digital ad market in the Kingdom, meaning hundreds of millions of riyals leave the country annually, weakening the local digital economy.

Al-Abbad argues that Saudi Arabia needs strong local digital ad networks to keep this revenue within the national economy. These networks would help create jobs, drive innovation, and promote cultural diversity in digital content. Developing local platforms would also enhance Saudi Arabia’s digital sovereignty by ensuring that data remains within the country and is not controlled by foreign entities.

Moreover, local networks would reduce dependence on international platforms, ensuring that the economic benefits of digital advertising remain in the Kingdom, he said, stressing that this would align with Saudi Arabia’s broader Vision 2030 goals, which emphasize building a robust, diversified economy driven by local industries and digital transformation.

Globally, the digital advertising sector is growing rapidly. In 2022, worldwide spending on digital ads reached $602 billion, and it is projected to hit $876 billion by 2026. In the Middle East and North Africa (MENA) region, the digital ad market grew to $5.9 billion in 2022, with Saudi Arabia’s market accounting for over $1.5 billion.

In other countries, the digital ad sector plays a crucial role in boosting national economies. For example, in the United States, the digital advertising industry contributed $460 billion to the GDP in 2021, about 2.1% of the total. In the UK, the sector accounted for 1.8% of GDP in 2022. This shows how important digital advertising can be in driving economic growth.

One of the key challenges facing Saudi Arabia’s digital ad sector is the dominance of global platforms like Google and Facebook, which control 60% of the global digital ad market, Al-Abbad told Asharq Al-Awsat. This dominance results in a significant outflow of revenue and allows these platforms to control digital data and content. He warned that this could undermine Saudi Arabia’s national sovereignty over its digital economy.

To counter this, he emphasized that Saudi Arabia needs to build competitive local networks that can retain a larger share of the market. This will not only keep more revenue in the country but also strengthen the Kingdom’s control over its digital data and content.