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French Program to Support Industrial Transformation in Saudi Arabia

Business France launches in Riyadh a program to support industrial transformation within NIDLP (SPA)
Business France launches in Riyadh a program to support industrial transformation within NIDLP (SPA)
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French Program to Support Industrial Transformation in Saudi Arabia

Business France launches in Riyadh a program to support industrial transformation within NIDLP (SPA)
Business France launches in Riyadh a program to support industrial transformation within NIDLP (SPA)

Business France, a French government agency concerned with international development, launched on Monday in Riyadh the first edition of a program to support industrial transformation in Saudi Arabia. The program was launched in cooperation with Saudi Arabia’s National Industrial Development and Logistics Program (NIDLP).

The program, which offers an expanded package dedicated to innovative French companies that are keen to become a major player in Saudi Arabia’s national transformation plan, Vision 2030, includes companies that aim to support the Saudi industrial revolution.

Saudi Arabia’s industrial strategy looks to triple manufacturing GDP by 2030.

NIDLP CEO Suliman Almazroua voiced excitement to maintain and develop bilateral cooperation with Business France, noting that the Kingdom is witnessing a rapid transformation since the launch of Vision 2030.

Almazroua pointed out that the transformation opens the doors of the Kingdom to the international community to achieve the ambitious goals that affect the future of Saudi Arabia.

He noted that transformation will be reflected in the promotion of both domestic and international economic growth.

For his part, Abdulrahman Baeshen, head of Al-Shorouk Center for Economic Studies in Jazan, Saudi Arabia, stressed the importance of strengthening Saudi-French cooperation in terms of transferring expertise and technology industries, especially since France leads European countries in terms of its attractiveness to foreign investments.

Baeshen explained that France has a large share of attracting international projects and industrial investments at the level of European countries, which gives it an industrial advantage and an innovative technical and research superiority.

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How Will Anticipated US Interest Rate Cut Impact Gulf Economies?

Standard & Poor’s analysts said that lower interest rates should boost Gulf non-oil economies. (Photo: Reuters)
Standard & Poor’s analysts said that lower interest rates should boost Gulf non-oil economies. (Photo: Reuters)
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How Will Anticipated US Interest Rate Cut Impact Gulf Economies?

Standard & Poor’s analysts said that lower interest rates should boost Gulf non-oil economies. (Photo: Reuters)
Standard & Poor’s analysts said that lower interest rates should boost Gulf non-oil economies. (Photo: Reuters)

The US Federal Reserve is expected to reduce interest rates again at its upcoming meeting, a decision anticipated to affect Gulf economies and their banking sectors.

The Federal Open Market Committee plans to meet for two days starting Wednesday, and market forecasts suggest a rate cut of 25 basis points. This adjustment is likely to prompt similar reductions by Gulf central banks, whose currencies are pegged to the US dollar, with the exception of Kuwait, which follows a currency basket.

Sovereign analyst at Standard & Poor’s Zahabiya Gupta said that lower interest rates should boost Gulf non-oil economies by supporting demand for credit and sectors like real estate and construction.

“We expect average growth of 3.3% in the Gulf from 2024 to 2027, compared to 1% in 2023, supported by strong non-oil activity and increased oil production,” she remarked.

Gupta added that monetary easing should also help reduce debt service costs for governments, especially those with high borrowing needs, like Saudi Arabia in absolute terms and Bahrain as a percentage of GDP. Inflation rates are expected to remain relatively low, given managed prices on many goods and the relatively strong dollar peg.

For his part, Credit analyst Dr. Mohamed Damak from Standard & Poor’s told Asharq Al-Awsat that Gulf banks’ profitability is expected to remain strong in 2024, buoyed by a delay in rate cuts, resilient asset quality, supportive economies, limited leverage, and high precautionary reserves.

“We expect a slight deterioration in profitability in 2025 as the Fed continues cutting rates, with a total anticipated decrease of 225 basis points, including the 50 basis point cut made in September 2024, which Gulf central banks are likely to follow,” he stated.

Yet, lower rates may also lessen unrealized losses Gulf banks have accumulated over the past two years, which are estimated at about $2.8 billion, or approximately 1.9% of shareholder equity, he underlined.

The negative impact of rate cuts may be partially offset by several factors, Damak explained, saying that Gulf banks can mitigate these effects through strategic balance sheet adjustments, such as locking in current rates or switching from variable to fixed rates. Another factor includes the potential shift of deposits back to non-interest-bearing instruments, reversing the trend of recent years when deposits moved to interest-bearing accounts due to rising rates.

Lower rates could also reduce banks’ risk costs, as companies may find it easier to meet their debt obligations, improving creditworthiness and lowering the need for banks to set aside provisions. Additionally, accelerated loan growth could help counterbalance lower margins, especially in high-demand markets like Saudi Arabia, driven by large-scale Vision 2030 projects.

Damak noted that the impact of lower rates on liquidity levels would likely be neutral overall, with an expected reduction in unrealized losses within Gulf banks’ investment portfolios, albeit by a modest amount ($2.8 billion by the end of 2023). Lower rates might also encourage Gulf banks to tap international capital markets more actively, especially in countries needing extra liquidity to stimulate loan growth, such as Saudi Arabia.