ECONOMY

FDI AND NON-OIL SECTOR SPUR SAUDI’S GDP EXPANSION

Saudi Arabia reported a 2.8% year-on-year increase in real GDP for the third quarter of 2024, fuelled by growth in non-oil activities. Seasonally adjusted GDP rose by 0.9% compared to Q2, according to the General Authority for Statistics (GASTAT).

Non-oil GDP grew by 4.3% year on year and 0.7% quarter on quarter. Meanwhile, oil GDP, representing 22.8% of the economy, edged up by 0.05%. Retail and leisure led the growth, with the wholesale and retail trade, restaurant, and hotel sector rising by 5.8%. Finance, insurance, and business services followed with a 5.7% increase, while construction rose 4.6%. 

Saudi Arabia’s total GDP in Q3 2024 stood at SAR 1.007 trillion (USD 268.5 billion). Oil activities remained the largest contributor to GDP, followed by government activities at 16.1%, and wholesale and retail trade, restaurant, and hotel activities at 10.1%.

On the trade front, imports grew 7.3% year on year, and 3.8% quarter on quarter. Exports increased 3% compared to Q3 2023 but declined by 5.7% from the previous quarter. 

The kingdom’s economy got o to a strong first half. Non-oil economy displayed robust growth, expanding by 3.8% during the first half of 2024versus the previous year. This growth was primarily driven by the private sector, which expanded by 4.2%, including a notable 4.9% increase in the second quarter — the strongest quarterly performance in a year. The trade and hospitality sector led the charge with a 6.4% rise, followed by transport and communications (4.8%), and finance and business services (3.8%). While manufacturing grew modestly at 1.7%, this marked a significant rebound from the 3.5% contraction recorded in 2023, despite constraints on crude feedstock caused by oil production cuts.

PURCHASING MANAGERS INDEX

The Saudi Arabia Purchasing Managers Index (PMI) highlighted robust growth in the kingdom's non-oil private sector in November, with business activity expanding at its fastest pace since July 2023. This growth has been attributed to sharp increases in new orders, purchasing activity, and staff recruitment, reflecting stronger demand and improving market conditions. 

The headline index rose to 59 in November, up from 56.9 in October, marking its highest level in over a year. All five components of the PMI contributed to the increase, signalling significant improvements in operating conditions. Stronger domestic and foreign sales fuelled the surge in new orders, while businesses attributed growth to higher customer numbers, investment spending, and effective marketing campaigns.

Employment also grew substantially, with firms adding workers at one of the fastest rates in over a decade. The enhanced workforce enabled companies to manage workloads effciently, resulting in marginal reductions in backlogs.

November's PMI findings underscore the resilience of Saudi Arabia's non-oil economy, showcasing robust demand and continued progress toward diversification goals under Vision 2030.

FDI BOOST

Looking ahead, the International Monetary Fund (IMF) predicts Saudi’s non-oil growth will accelerate to 4.4% in 2025.

This expected rebound is attributed to the anticipated completion of major projects such as the Riyadh Metro and Red Sea hotels, alongside a range of private sector developments initiated post-pandemic. These projects are likely to bolster the kingdom’s non-oil economic diversification goals, further reinforcing its Vision 2030 objectives.

Another key economic driver will be foreign direct investment (FDI), which has been updated by the government based on new methodology of the Balance of Payments Manual published by the IMF.

The new statistics show that the actual performance of FDI has exceeded the targets of the National Investment Strategy (NIS). The results show that FDI inflow amounted to SAR 96 billion in 2023, exceeding the NIS target of SAR 83 billion by 16%. FDI inflow reached 2.4% of GDP in 2023, achieving the NIS target. FDI inflow grew by 50% in 2023 compared to 2022 after excluding the exceptional Aramco pipeline deal in 2022. The kingdom’s FDI stock also increased by 13% in 2023 compared to 2022, amounting to approximately SAR 900 billion.

Compared to other G20 countries, Saudi Arabia ranked 11th in terms of FDI net inflow and 16th in terms of cumulative FDI stock in 2023. Additionally, Saudi Arabia ranked 2nd in terms of FDI net inflow growth rate in 2023, and 4th in terms of FDI stock growth rate for the same year.