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Non-Oil Activities Drive Saudi Arabia’s Economic Growth

Riyadh, Saudi Arabia (SPA)
Riyadh, Saudi Arabia (SPA)
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Non-Oil Activities Drive Saudi Arabia’s Economic Growth

Riyadh, Saudi Arabia (SPA)
Riyadh, Saudi Arabia (SPA)

Non-oil activities in Saudi Arabia have driven the growth of the real gross domestic product (GDP), achieving a year-on-year increase of 2.8% by the end of the third quarter of 2024.
Quarter-on-quarter, the economy recorded a growth of 0.9%, according to data from the General Authority for Statistics (GASTAT). These figures confirm earlier rapid estimates released by the authority at the end of October.
In terms of economic activities, the non-oil sector grew by 4.3% year-on-year and 0.7% on a quarterly basis. Government activities saw a year-on-year growth of 3.1% but declined by 0.3% quarter-on-quarter. Meanwhile, oil activities recorded a marginal year-on-year growth of 0.05% and a 1.2% quarter-on-quarter increase.
Government final consumption expenditure rose by 6.2% yearly, but it contracted by 1.8% on a quarterly basis. Gross fixed capital formation grew by 4.5% year-on-year and 0.9% quarter-on-quarter. Private final consumption expenditure increased by 3.9% year-on-year and 2.8% quarter-on-quarter.
In foreign trade, imports rose by 7.3% compared to the same period last year and 3.8% on a quarterly basis. Exports grew by 3.0% year-on-year but declined by 5.7% quarter-on-quarter.
Various economic activities continued to achieve positive growth rates. Wholesale and retail trade, restaurants, and hotels recorded the highest annual growth at 5.8%, followed by financial services, insurance, and business services, which grew by 5.7%. Construction activities increased by 4.6% year-on-year.
The nominal GDP in the third quarter reached SAR 1.007 trillion, with oil and natural gas activities contributing the largest share (22.8%) to GDP. Government activities accounted for 16.1%, while wholesale and retail trade, restaurants, and hotels contributed 10.1%.
Sustained Economic Improvement
Dr. Nayef Al-Ghaith, Chief Economist at Riyad Bank, emphasized that this GDP growth is primarily due to the expansion of non-oil activities and growth across various sectors, including wholesale and retail trade, restaurants, and hotels.
Al-Ghaith noted that this growth aligns with the performance of the Purchasing Managers’ Index (PMI), which continues to exceed 50, reflecting expansion in economic activity.
He expected economic growth to persist in the fourth quarter of 2024 at levels similar to those seen in the third quarter. This optimism is fueled by continued improvements in non-oil and government activities, along with slight growth in oil activities.
He added that local demand, improvements in the global economic environment, and ongoing diversification efforts under Vision 2030 are expected to sustain economic momentum.
“This growth reflects ongoing efforts to enhance diversification and economic sustainability through investments in non-oil sectors and support for various activities,” Al-Ghaith stated, noting that these efforts will continue to drive economic growth in the coming periods, supporting the goals of Vision 2030.
World Bank Projections
The World Bank, in its Gulf Economic Update, predicted that Saudi Arabia’s real GDP would grow by 1.1% in 2024, driven by a 4.6% expansion in non-oil activities. However, it projected a 6.1% decline in oil GDP, attributed to voluntary oil production cuts.
The World Bank also forecast that growth would accelerate to an average of 4.7% in 2025 and 2026, supported by increased oil production.

 

 

 

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Saudi Arabia Raises $12 Billion in International Bonds Amid Strong Demand

Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).
Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).
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Saudi Arabia Raises $12 Billion in International Bonds Amid Strong Demand

Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).
Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).

Saudi Arabia has raised $12 billion from global debt markets in its first international bond issuance of the year, attracting bids worth nearly $37 billion. This demonstrates strong investor appetite for Saudi debt instruments.

The issuance comes just two days after the approval of the 2025 annual borrowing plan by Minister of Finance Mohammed Al-Jadaan. The plan estimates financing needs for the fiscal year at SAR 139 billion ($37 billion). The funds will be used to cover the projected SAR 101 billion ($26.8 billion) budget deficit for 2025, as well as repay SAR 38 billion ($10 billion) in principal debt obligations due this year.

The National Debt Management Center (NDMC) announced on Tuesday that the issuance includes three tranches: $5 billion in three-year bonds, $3 billion in six-year bonds, and $4 billion in ten-year bonds. Total demand for the bonds reached $37 billion, exceeding the issuance size by three times and reflecting robust investor interest.

The NDMC emphasized that this issuance aligns with its strategy to broaden the investor base and efficiently meet Saudi Arabia’s financing needs in global debt markets.

According to IFR, a fixed-income news service, the initial price guidance for the three-year bonds was set at 120 basis points above US Treasury yields. The six-year and ten-year bonds were priced at 130 and 140 basis points above the same benchmark, respectively.

Strong demand allowed Saudi Arabia to lower yields on the shorter-term bonds, further demonstrating investor confidence. Economists noted that the pricing above US Treasuries is attractive in the current market, showcasing trust in Saudi Arabia’s economic stability and financial strategies.

International confidence

Economic experts view this successful bond issuance as a testament to international confidence in Saudi Arabia’s robust economy and financial reforms. Dr. Mohammed Al-Qahtani, an economics professor at King Faisal University, said the move underscores Saudi Arabia’s commitment to diversifying financing tools both domestically and internationally. He added that the funds would support Vision 2030 projects, reduce pressure on domestic resources, and attract strong international investor interest.

The issuance strengthens Saudi Arabia’s ability to meet financial needs, expand its investor base, and establish a global financing network, he said, noting that it also facilitates entry into new markets, enabling the Kingdom to accelerate infrastructure projects and capital expenditures.

Dr. Ihsan Buhulaiga, founder of Joatha Business Development Consultants, described the 2025 budget as expansionary, aimed at meeting the financing needs of economic diversification programs. He stressed that the budget deficit is an “optional” one, reflecting a deliberate choice to prioritize Vision 2030 initiatives over immediate fiscal balance.

Buhulaiga explained that the Kingdom’s approach balances two options: limiting spending to available revenues, which would avoid deficits but delay Vision 2030 initiatives, or borrowing strategically to fund Vision 2030 goals. He said that the annual budget is just a component of the larger vision, which requires sustained funding until 2030.

He continued that Saudi Arabia’s fiscal space and creditworthiness allow it to borrow internationally at competitive rates, explaining that this flexibility ensures financial sustainability without compromising stability, even during challenges like the COVID-19 pandemic.

Saudi Arabia’s debt portfolio remains balanced, with two-thirds of its debt domestic and one-third external. As of Q3 2024, public debt stood at approximately SAR 1.2 trillion, below the 30% GDP ceiling. According to the Ministry of Finance, the budget deficit is expected to persist through 2027 but remain below 3% of GDP.

Buhulaiga highlighted the importance of capital expenditure, which reached SAR 186 billion in 2023 and is projected to rise to SAR 198 billion in 2024, a 6.5% increase.

He emphasized the government’s pivotal role in economic diversification, supported by investments from the Public Investment Fund (PIF), the National Development Fund, and its subsidiaries, including the Infrastructure Fund.

The PIF recently announced a $7 billion Murabaha credit facility, facilitated by Citigroup, Goldman Sachs International, and JPMorgan. Meanwhile, the NDMC arranged a $2.5 billion revolving credit facility earlier in January, compliant with Islamic principles, to address budgetary needs.

In November, Moody’s upgraded Saudi Arabia’s credit rating to Aa3, aligning with Fitch’s A+ rating, both with a stable outlook. S&P Global assigns the Kingdom an AA-1 rating with a positive outlook, reflecting a high ability to meet financial obligations with low credit risk.

The IMF estimates Saudi Arabia’s public debt-to-GDP ratio at 26.2% in 2024, describing it as low and sustainable. This is projected to rise to 35% by 2029 as foreign borrowing continues to play a key role in financing deficits.