World Bank Official: Saudi Arabia Takes Economic Diversification Agenda Seriously

A session of the International Monetary Fund (IMF) and World Bank meetings in the Moroccan city of Marrakesh (Reuters)
A session of the International Monetary Fund (IMF) and World Bank meetings in the Moroccan city of Marrakesh (Reuters)
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World Bank Official: Saudi Arabia Takes Economic Diversification Agenda Seriously

A session of the International Monetary Fund (IMF) and World Bank meetings in the Moroccan city of Marrakesh (Reuters)
A session of the International Monetary Fund (IMF) and World Bank meetings in the Moroccan city of Marrakesh (Reuters)

The World Bank expects a sharp decline in the growth of the economies of the countries of the Middle East and North Africa region this year, reaching 1.9 percent from 6 percent last year, driven by reduced oil production, tight global financial conditions, and high inflation.

These forecasts were issued before the military escalation between Israel and Gaza, which will have repercussions on the economy at the regional and global levels. Bloomberg expects global growth to decline to 1.7 percent (from 1.9 percent according to recently issued International Monetary Fund estimates).

In an interview with Asharq Al-Awsat on the sidelines of the annual meetings of the International Monetary Fund (IMF) and the World Bank in Marrakesh, World Bank’s chief economist for the Middle East and North Africa region, Roberta Gatti, said that the region witnessed exceptional growth last year, which was the highest in about 15 years, driven by oil prices and the rise in oil exports after the Russian-Ukrainian war. In 2023, growth declined starkly, as demand for oil was below the expectations.

Hence, the largest decline in growth rates was registered in the oil-exporting countries of the Gulf Cooperation Council, where real GDP growth is expected to reach 1 percent in 2023, down from 7.3 percent in 2022, as a result of oil production cuts and lower oil prices. As for oil-exporting developing countries, growth is expected to decline from 4.3 percent in 2022 to 2.4 percent in 2023.

According to Gatti, Saudi Arabia recorded a significant decline in the oil sector, in parallel with a remarkable growth in non-oil activities by about 3.7 percent.

In this context, the World Bank official noted that Saudi Arabia “takes the economic diversification agenda seriously”, as it plans its expenditures and its financial budget in accordance with a fixed price rate for oil based on around $70.

Gatti noted that other countries in the region, such as Egypt and Tunisia, whose economies were already affected by the pandemic, were suffering severely due to high inflation rates. Thus, higher interest rates would make the economic situation more complex, as they lead to increased debt service, she remarked.

On Egypt, the World Bank chief economist said that adopting a flexible exchange rate was is an essential step for the country, in parallel with the need for financial and structural policies that are consistent with the reforms requested by the IMF.

The most important way to reduce the high public debt to GDP is to maximize the role of the private sector with the aim of achieving greater growth, she stressed.

Gatti went on to say that the World Bank’s vision of the labor market in the Middle East and North Africa region was closely linked to growth and social stability. She explained that countries must think about doubling their resistance to shocks and finding the necessary mechanisms to expand financial space, as World Bank figures show that the MENA region has the highest incidence of climate-related disasters compared to other countries in the world.



Non-oil Private Sector Growth Boosts Saudi Arabia’s Economic Expansion

A general view of Riyadh, Saudi Arabia. (Reuters)
A general view of Riyadh, Saudi Arabia. (Reuters)
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Non-oil Private Sector Growth Boosts Saudi Arabia’s Economic Expansion

A general view of Riyadh, Saudi Arabia. (Reuters)
A general view of Riyadh, Saudi Arabia. (Reuters)

Saudi Arabia’s non-oil private sector continued to witness steady improvements in operating conditions during May, mainly driven by an expansion in new business and a recovery in customer demand.

This strong performance underscores the resilience of Saudi Arabia’s non-oil economy and its capacity to achieve sustainable growth.

The Riyad Bank Purchasing Managers’ Index (PMI) rose in May, reaching 55.8 points, indicating a strong improvement in business conditions, though still below the peak recorded earlier this year.

These positive figures reflect growing confidence in the sector’s future, with output expectations reaching an 18-month high, signaling operational readiness for continued growth in the second half of the year.

Key findings of the PMI show a notable acceleration in new order growth during May, following a slowdown in April. Companies attributed this increase to stronger demand, robust sales performance, and new marketing initiatives. New orders from abroad also grew, although at the slowest pace in the past seven months.

This positive momentum was mirrored in employment levels, as companies increased their workforce to meet rising production requirements, marking one of the fastest hiring rates in over a decade.

The workforce growth was accompanied by a surge in purchasing activity, which saw its fastest rise since March 2024, reflecting improved supply chain flexibility.

The Kingdom’s non-oil private sector is showing strong confidence in the future, with business expectations reaching their highest level since late 2023.

Business activity rose in May, driven by increased customer demand and production needs, although the overall rate of growth was the slowest since last September. The construction sector played a key role in this growth, recording the strongest increases in both activity and new business.

Despite this strong performance, non-oil firms faced a sharp rise in input costs during May. However, inflation slowed compared to April due to reduced wage pressures.

Conversely, selling prices declined in May, driven by a sharp drop in service sector prices, with companies citing competitive pressures impacting their pricing power.

Commenting on these results, Dr. Naif Al-Ghaith, Chief Economist at Riyad Bank, affirmed that Saudi Arabia’s non-oil economy maintained its strong momentum in May.

He noted that improving demand, robust economic activity, the launch of new projects, and increased labor productivity all contributed to continued growth, despite the pace slowing to its lowest level since September 2024.