Saudi Arabia has made remarkable strides in its tourism sector, exceeding the Vision 2030 target of attracting 100 million annual visitors by 2023, seven years ahead of schedule. The International Monetary Fund (IMF), in its 2024 Article IV Consultation report, highlighted the sector’s significant contribution to the Kingdom’s economic diversification.
Tourism revenues reached $36 billion in 2023, with net tourism income increasing by 38%. The sector’s direct and indirect contribution to the GDP hit 11.5% in 2023, with projections to grow to 16% by 2034. Strong domestic demand and increased international arrivals, particularly in non-religious tourism, drive this growth.
Major international events like Formula One, the 2027 Asian Cup, and the 2030 World Expo have further fueled this surge.
Economic Impact and Sectoral Linkages
The IMF report underscores tourism’s role in shifting Saudi Arabia’s service balance to a surplus, as the Kingdom now earns more from international visitors than it spends on outbound tourism. This positive balance, achieved in 2022, continued to grow in 2023, boosted by increased revenue from transportation and service exports.
The transformation has been supported by diverse linkages between tourism and other industries, such as food, beverage, travel, cultural industries, and accommodation. These connections are helping reduce Saudi Arabia’s reliance on oil-intensive sectors. Major projects like Red Sea Global and Diriyah Gate, which focus on luxury tourism and cultural preservation, are pivotal to this shift.
IMF Commends Economic Diversification
The IMF has also praised Saudi Arabia’s broader economic transformation efforts under Vision 2030. In a recent press release, the IMF highlighted the Kingdom’s progress in modernization and diversification. The IMF projected a 4.4% growth in the non-oil sector in the medium term, driven by stronger domestic demand and project implementation. Experts expect overall growth to reach 4.7% in 2025, with the phase-out of oil production cuts.
Inflation and Financial Resilience
The IMF noted that inflation in Saudi Arabia remains under control, thanks to a credible peg to the US dollar and consistent domestic policies. Inflation rates dropped from 3.4% in January 2023 to 1.6% in May 2024. The current account surplus declined to 3.2% of GDP in 2023, reflecting lower oil exports and strong growth in investment-related imports. However, this was partly offset by a record surplus in the services balance, including a 38% surge in net tourism income.
Saudi Arabia’s reserves remain robust, covering 15.8 months of imports and 208% of the IMF’s reserve adequacy metric by the end of 2023. The IMF also emphasized the strength of Saudi Arabia’s banking sector, noting that banks and non-financial corporates are resilient to shocks, even under severe adverse scenarios.
The IMF Executive Board commended Saudi Arabia for its ongoing economic transformation, underpinned by sustained efforts to diversify the economy under Vision 2030.
