Saudi Economy Set for Strong Growth, Forecast to Shine in G20 by 2025

Riyadh, Saudi Arabia - In an upbeat forecast, the Saudi economy is projected to experience its strongest growth in three years by 2025, with many leading local and international institutions predicting an expansion rate of between 4.6% and 4.7%. This surge places it as the second fastest-growing economy within the G20 nations.

The Financial Analysis Unit at Al-Eqtisadiah newspaper has tempered expectations slightly, anticipating growth in the range of 4% to 4.5%. This adjustment is attributed to scaled-back expectations of interest rate cuts—from initially predicted four times to now twice—which may dampen the earlier outlook slightly.

After a challenging 2023, where the Saudi economy contracted by 0.8% amid reduced oil production, a recovery is on the horizon with a forecasted growth of 0.8% this year, bolstered significantly from a high 7.5% growth in 2022.

* Key Growth Drivers

Several elements are fueling optimism for 2025. Crucially, the effect of reduced oil prices is expected to diminish, thanks to consistent production levels. Despite the OPEC+ decision to maintain a production cut until the end of 2025, Saudi Arabia's production is pegged at about 9 million barrels per day unless the kingdom halts the voluntary cut. Should that occur, production could surge past 10 million barrels daily, significantly boosting economic prospects.

Furthermore, even with a modest reduction of interest rates anticipated only twice, such financial easing is set to invigorate corporate borrowing and expansion efforts amidst favorable borrowing costs, directly benefiting overall economic growth.

The diversification of Saudi Arabia’s economy continues with the non-oil sectors like tourism, entertainment, sports, wholesale and retail trade, finance, insurance, construction, and transportation expected to power ahead. These sectors are poised for rapid growth due to promising new initiatives and the backdrop of major upcoming international events hosted by the kingdom, like the 2027 Gulf Cup, Expo 2030, and the 2034 World Cup.

* Expert Forecasts and Government Projections:

Predictions from global economic powerhouses such as the World Bank, Moody’s, Fitch, and S&P all align, foreseeing a 4.7% growth. On the other hand, the International Monetary Fund and the Saudi Ministry of Finance slightly lower their expectations to 4.6%. The Saudi government remains optimistic about its local economic expansive trajectory at 0.8% this year, with consistent annual growth of over 3.5% until 2027, driven by the burgeoning non-oil sectors.

The non-oil segment itself is anticipated to mark a 3.7% growth, buoyed by favorable economic indicators, aggressive tourism promotion, and investment attraction strategies employed in the first half of this year. Looking ahead, the Ministry of Finance projects economic growth rates for the Saudi economy of 0.8% in 2024, and escalating to 4.6% in 2025, before maintaining a robust 4.7% in 2027.

In conclusion, the Saudi economy is positioned for a significant upturn, underpinned by strategic diversifications and a vibrant non-oil sector that continues to attract investment and foster job creation, leading the path towards realizing Saudi Vision 2030.