Saudi Arabia’s inflation forecast for 2024 has been revised down to 1.7% from the previous 2%. This adjustment reflects robust non-oil sector growth and stabilizing prices in key areas, according to Jadwa Investment’s latest report.
Non-Oil Sector Drives Economic Stability
The report highlights Saudi Arabia’s strong economic position despite global oil market challenges. Jadwa projects real non-oil GDP growth of 4.5% in 2024, slightly above the 4.4% recorded last year. Strong performances in domestic trade, transport, and construction fuel this growth, with significant public and private investments providing support. Analysts expect economic activity to accelerate in the second half of 2024, particularly in the fourth quarter, contributing to the Kingdom’s diversification efforts under Vision 2030.
Oil Sector Faces Challenges
In contrast, the oil sector presents a more challenging outlook. Analysts expect Saudi Arabia’s crude oil production to average around 9 million barrels per day in 2024. This follows OPEC+’s decision to extend production cuts. Consequently, hydrocarbons GDP is projected to contract by 6% this year, leading to modest overall economic growth of 1.5%. Despite these challenges, the Kingdom’s fiscal position remains stable, supported by higher non-oil revenues and strategic investments.
Easing Inflation Pressures
Inflation in Saudi Arabia has been eased by lower prices in clothing, footwear, and transportation. These factors have offset inflationary pressures from the housing market, though housing costs, particularly in the rental segment, remain a significant driver due to high demand and a tight rental market. Jadwa anticipates a gradual rebound in food and beverage prices in the latter half of the year, influenced by global trends and rising shipping costs.
Stable Fiscal Outlook
Jadwa forecasts a budget deficit of SAR 83 billion, or 2% of GDP, for 2024, mirroring 2023’s performance. The report also underscores the role of increased dividends from Aramco in stabilizing the Kingdom’s fiscal position, despite lower oil production volumes. Analysts expect crude prices to average $84 per barrel in 2024. They predict a slight decrease to $82 per barrel in 2025 due to global GDP growth challenges and anticipated OPEC+ supply increases.
Overall, Saudi Arabia’s economy remains on a stable growth trajectory, supported by its non-oil sectors and strategic investments aligned with Vision 2030’s goals of diversification and sustainable development.
