Moody's recent rating has upgraded the economic outlook, reinforcing optimism that GDP will reach $1 trillion in the coming years

How the private sector is strengthening the resilience of the Saudi economy in the face of fluctuations

photo_camera AFP PHOTO/HO/ARAMCO - Oil and gas facilities, Dhahran, eastern Saudi Arabia

Analysts have praised Saudi Arabia's ability to cope with global challenges. They have highlighted the private sector-led economic reform that has contributed to the country's sustained growth. These assessments encourage the country to press ahead with these reform policies.

Moody's noted that Saudi Arabia's non-oil sector has strengthened significantly in recent years and has been the main driver behind economic growth. This is largely due to the Saudi government's efforts to diversify the economy by carrying out structural reforms, including the introduction of taxation, modernisation of regulatory systems, as well as infrastructure improvements. These reforms have led to increased foreign investment, which has stimulated economic growth and contributed to job creation. The report also highlights that accelerated private sector growth in recent years has helped improve fiscal revenues.

In addition, the report notes that increased foreign investment will translate into increased demand for goods and services, which in turn will help boost economic growth. The agency also highlighted efforts to improve its investment climate, which will contribute to further economic growth.

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Moody's said, "The growth momentum in the second half of last year supports continued growth in the Saudi economy in the current year."

The agency expects the Saudi economy to grow by 2.5% this year, compared with previous expectations of 1.7% growth. It also raised growth expectations to 3.1% next year, up from 2.6% previously.

In addition, the Central Bank of Saudi Arabia reported that the consumer price index (CPI) in the economy remained relatively stable in January, rising 0.2% year-on-year, compared to 0.4% in the previous month. Food prices remained relatively stable, although most commodities increased slightly. The main purchasing managers' index rose to 58.2 points in January, up from 56.9 points in December, which is the second highest level recorded since September 2021.

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Moody's view of the Saudi economy reflects improving private sector confidence and rising consumer prices. This suggests that the Saudi economy is gradually recovering and is well positioned for further recovery in the coming months.

In addition, the Saudi government has made efforts to diversify its economy by promoting foreign investment to stimulate industrial production and agriculture, which has helped to increase employment and improve living conditions. The government has announced plans to build the city of Neom, a futuristic city that is expected to have an artificial intelligence-based economy.

This shows that the Saudi economy is still largely dependent on oil, although it is taking steps to diversify its economic base. According to official figures, the main Saudi non-oil exports in 2021 were chemicals, pharmaceuticals, plastic products, metal products and engineering products. In addition, the food products industry also made a significant contribution. Therefore, the oil price remains critical for the budget balance. Experts estimate that Saudi Arabia needs an oil price of around $80 per barrel to balance its budget. This largely explains its resistance to US pressures to increase oil production and its adherence to the OPEC+ agreement that it leads along with Russia.

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Saudi Arabia is therefore taking decisive steps to diversify its economy and meet Vision 2030 goals. This demonstrates its commitment to the future and to the long-term development of its economy.

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