Complex Made Simple

Saudi’s booming economy, tourism plans, good news for job creation

Saudi’s economy grew at its fastest pace in nearly a decade in Q3, boosted by higher oil prices, according to preliminary estimates from the government

Saudi Vision 2030, when launched in 2016, aimed to boost annual FDI to nearly $19 billion by 2020 Unemployment has fallen to 11.3% in Q2 of 2021 from 15.4% in Q2 2020 In Q2 of this year, Saudi hotels logged $590 million in transactions, a 7% increase over the same period in 2019

Saudi’s economy grew at its fastest pace in nearly a decade in Q3, boosted by higher oil prices, according to preliminary estimates from the government that Bloomberg used for its report.

GDP in Saudi expanded by 6.8% compared QoQ, the General Authority for Statistics said recently, its fastest pace since 2012, when oil prices averaged $122 a barrel.  

The kingdom’s oil sector grew 9% YoY, while the non-oil economy expanded by 6.2%.  

Officials expect the 2022 budget deficit to shrink to around 1.6% of economic output on the back of higher expected revenues as oil prices recover.

The International Monetary Fund is expecting Saudi economic growth to average about 2.8% this year, following a 4.1% contraction in 2020 as the pandemic took its toll. It sees growth recovering to nearly 5% in 2022.

Saudi FDI rebounding

Saudi Vision 2030, when launched in 2016, aimed to boost annual FDI to nearly $19 billion by 2020 from $8 bn in 2015, but last year, it was just $5.5 bn. The longer-term goal was for FDI to hit 5.7% of gross domestic product (GDP) by 2030.

Saudi Crown Prince Mohammad Bin Salman recently announced a new investment strategy that promised $100 bn in annual FDI by 2030. Saudi Investment Minister Khalid al-Falih said the FDI numbers were already improving.

“We are fixing the system, we are preparing the deals, we are engaging companies,” he told Reuters. “A lot of our transactions are being prepared.”

In the first half of 2021, excluding the leasing of Saudi Aramco’soil pipelines, FDI rose 33% from the same period in 2020 and was already above targets for this year as a whole, he said.

Tourism and jobs

The Saudi government expects tourism to be the largest source of new jobs in the private sector, accounting for 10% of both GDP and employment within a decade. Saudi has 21 million citizens, two-thirds of whom are under 35. Unemployment has fallen to 11.3% in Q2 of 2021 from 15.4% in Q2 2020. Women now represent 28% of working Saudis, up from 16% five years ago.

Citizens are still just 24% of the workforce in sales and 20% in hospitality. Over 85% of the jobs in construction, the industry that employs the most people, are done by foreigners. Half of the unemployed citizens hold at least a bachelor’s degree.

“The tourism industry is at the top of our 2030 agenda,” says Ahmed al-Khateeb, the Saudi tourism minister, who hopes to see 100 million local and foreign tourists by then. Saudi did not even offer tourist visas until 2019.  

To that end, Saudi continues to ease social restrictions. Partitions that separated single men from families have come down in smart restaurants. Young Saudis crowd cinemas, while on October 20th, hundreds of thousands of people in Riyadh attended a concert by Pitbull, an American singer.

Staycations are also making an impact. In Q2 of this year, Saudi hotels logged $590 million in point-of-sale transactions, a 7% increase over the same period in 2019. “It was pure Saudi spend,” says Princess Haifa Al Saud, who oversees the national tourism strategy.

Oxagon: Saudi’s sea-born industrial city  

Saudi Crown Prince Mohammed bin Salman has announced a futuristic new industrial city in the sea called Oxagon.

The city is set to be the largest floating industrial complex in the world.

“Oxagon will be the catalyst for economic growth and diversity in Neom and the kingdom, further meeting our ambitions under Vision 2030,” the Saudi Crown Prince told the Saudi Press Agency.

Oxagon will establish the world’s first fully-integrated port and supply chain ecosystem for futuristic city Neom.

Neom chief executive Nadhmi Al Nasr told a regional news outlet that Oxagon would be “a blueprint for a blue economy” and will “urbanize the sea”.

The plan for Oxagon is to be a net-zero city fully powered by clean energy.

Budget surplus

Saudi recorded a budget surplus of $1.79 bn in Q3 this year, as higher oil prices fueled its first quarterly surplus in over two years. Q3 income from oil sales increased 60% to $40 bn.

But non-oil revenue contracted 22% to $25.7 bn, according to a finance ministry report that said quarterly public expenditure was down 8% year-on-year to $64 bn.

Saudi Aramco said its Q3 net profit more than doubled.

The Saudi budget deficit had ballooned to over 11% of GDP last year, according to the IMF which expects the kingdom to bring down its fiscal deficit to 4.2% of GDP this year.