Saudi Arabia’s ongoing economic diversification drives robust growth, particularly in the non-oil sector. This strategy aligns seamlessly with Vision 2030 objectives. A recent report by First Abu Dhabi Bank predicts a 4.4% increase in the non-energy GDP during 2025. This estimate significantly surpasses the previous year’s growth rate of 3.5%.
The forecast aligns with PwC’s projection of the non-oil economy mirroring a 4.4% growth this year. In January, the International Monetary Fund (IMF) also forecasted a 3.3% overall economic expansion for Saudi Arabia in 2025. Additionally, growth expectations increase to 4.1% by 2026, showcasing a promising economic trajectory.
Furthermore, FAB’s analysis aligns with recent insights from Riyad Bank, predicting an impressive 4.8% growth for Saudi Arabia’s economy next year. Moody’s uplifted Saudi Arabia’s sovereign credit rating from A1 to Aa3 in November 2024, enhancing investor confidence in the nation. Such upgrades denote countries with high quality and minimal credit risks.
Solidifying Saudi Arabia as a Financial Powerhouse
The upgrade signals Saudi Arabia’s successful economic diversification and reduced dependence on oil market fluctuations. Jihad Azour, IMF’s director for the Middle East, recently emphasized Saudi Arabia’s emergence as an economic “powerhouse.” This progress further consolidates the Kingdom’s role in the international financial system.
For the Gulf Cooperation Council (GCC) region, GDP growth is expected to double from 2.1% in 2024 to 4.2% in 2025. This surge results from sustained growth in non-energy sectors across member countries. FAB anticipates a 5.6% growth for the UAE in 2025, driven by strategic investments.
Strength in the Non-Energy Sector
Non-oil business conditions in the GCC exhibit robust growth, indicating a vibrant economic landscape. Recent reports reveal Saudi Arabia’s Purchasing Managers’ Index (PMI) reached 60.5, marking ten years of growth. High PMIs across the region signify strong domestic activity, contributing to overall economic success.
FAB identified significant investment opportunities across various sectors in the GCC. Digital transformation generates growth for companies focused on technologies like artificial intelligence and cybersecurity. Moreover, infrastructure developments in Saudi Arabia attract foreign investments, highlighting burgeoning sectors such as construction and technology.
Sustainability continues to be pivotal, with governments encouraging environmentally-friendly practices. Initiatives focused on renewable energy provide substantial investment opportunities, particularly in solar power. Fab’s report notes that tourism, driven by megaprojects like NEOM and Expo 2030, promises growth in hospitality and related services.
Real Estate Sector Opens to Investors
The real estate sector also presents attractive investment prospects. Rising demand for residential and commercial properties aligns with regulatory changes promoting foreign investment. In January, Saudi Arabia’s Capital Market Authority allowed foreign investments in listed companies acquiring real estate in Makkah and Madinah.
Saudi Arabia’s strategic approach to economic diversification and development will undoubtedly propel robust growth in 2025. The continuing efforts in infrastructure, sustainability, and tourism promise significant opportunities for investors across various sectors.
