Saudi Arabia – The Growing Economy
The Kingdom of Saudi Arabia is leading the way with the enormous changes taking place in its business arena and wide-ranging economic programmes gearing-up to turn around its economy over the coming years.
From the ambitious Vision 2030 programme and the privatization of key government agencies, to the launch of the region’s biggest ever renewables programme and progress on public-private partnership projects, the stage is set to help the industry thrive.
Saudi Arabia’s finance industry is one of the world’s most resilient today with its large financial asset base and strong foreign exchange reserves. The banks are its strength and are in a strong position to withstand weaker growth, says the Washington-based IMF. Even in a global financial downturn of 2008/09, Saudi banks experienced no failures.
With relatively stable oil prices and reforms supporting non-oil economy, Riyadh expects a better budgetary performance this year. The real GDP growth that dropped to 1.2% in 2016 from 3.5% in 2015, looks to improve to 2% in 2017. In addition, the fiscal deficit is forecast to narrow down in 2017.
The kingdom’s National Transformation Plan (NTP) to transform its economy is the most ambitious initiative taken by the government and Prince Mohammed bin Salman, who is now the Crown Prince to the Saudi throne. The programme will create 6 million jobs by 2030. Banking and finance is said to make the biggest contribution.
Saudi Arabia will privatize about 100 companies in various sectors, which could yield up to $200 billion. Healthcare, transportation, power and water, are some the key sectors named to be privatized. The privatization of Saudi Aramco is expected to be the largest IPO the world has ever seen. The company plans to create a 5% stake worth about 7-15% of GDP.
The outlook for projects is improving in the kingdom with new multi-billion-dollar projects emerging from the planning phases. The biggest megaproject – $93 billion King Abdullah Economic City – is scheduled for commissioning in 2034.
Saudi Aramco, responsible for the entire hydrocarbons operations in the kingdom, plans more than $300 billion investment in the next 10 years. It will continue to invest in maintaining its oil production capacity of 12 million b/d and pursue a large exploration and production programme as well as double the kingdom’s natural gas production capacity to 23 billion scf/d.
In an energy reform push, Saudi has launched a programme under the IPP model to build an initial renewable capacity of 9.5 GW by 2023, which will be 10% of total installed capacity in the kingdom.
A new economic model is being rolled-out. With a history of significant economic contributions and strong governance, the biggest Arab economy is all set to take the developments to the next level.