Saudi Arabia stands as the largest economy in the Middle East, with a nominal GDP of approximately USD 1.0 trillion. Historically reliant on oil exports, the Kingdom has been actively diversifying its economic base through its Vision 2030 initiative, fostering growth in non-oil sectors such as tourism, entertainment, and technology. This strategic shift aims to reduce dependence on hydrocarbons and position Saudi Arabia as a leading global investment hub.
Recent GDP Growth Rate
In the third quarter of 2024, Saudi Arabia’s real GDP grew by 2.8% year-on-year, driven primarily by a 4.2% increase in non-oil activities and a 3.1% rise in government activities. The oil sector experienced modest growth of 0.3% during the same period.
Current Inflation Trends
As of November 2024, Saudi Arabia’s annual inflation rate rose to 2% from 1.9% in October, primarily driven by an increase in housing rents, which rose by 10.8%. Food and beverage prices saw a modest increase of 0.3%. The relatively low and stable inflation rate supports consumer purchasing power and economic planning.
Saudi Arabia’s Economy is Experiencing Significant Transformations
Economic Trends
Non-Oil Sector Growth: The non-oil private sector continues to expand robustly, with the Purchasing Managers’ Index (PMI) registering at 58.4 in December 2024. This growth is propelled by strong domestic demand and a notable increase in export orders.
Foreign Direct Investment (FDI): Saudi Arabia is intensifying efforts to attract FDI to support its ambitious economic development goals. The Public Investment Fund (PIF) is shifting focus from international investments to domestic projects, aiming to reduce the proportion of foreign investments from 30% to about 18% of its portfolio.
Future Investment Opportunities
Renewable Energy: Saudi Arabia is making significant strides in the renewable energy sector, aiming to generate 50% of its energy from renewable sources by 2030. The government has announced plans to build 16 nuclear facilities over the next 20 years, with efforts also focusing on wind and solar energy.
Technology and Innovation: The Kingdom is positioning itself as a global hub for artificial intelligence (AI), with technology projected to add nearly $20 trillion to the global economy by 2030. The PIF is investing in AI and related technologies to drive economic growth and diversification.
Tourism and Entertainment: Aligned with Vision 2030, Saudi Arabia is developing its tourism sector through projects like the Red Sea Project and NEOM, aiming to attract international tourists and investors. The issuance of tourist visas to visitors from 49 countries and the development of luxury tourism destinations are key components of this strategy.
Construction and Infrastructure: The construction sector is poised for significant growth, driven by major infrastructure projects such as the $500 billion NEOM smart city and The Red Sea Global. These projects are creating substantial demand for construction services and offer opportunities for international firms.