The Saudi Arabian economy continued its success achieving growth supporting the banking, real estate and digital sectors.
In the fourth quarter of 2021, the Saudi economy achieved 6.7% growth, compared to the same quarter of 2020.
The economic growth is mainly due to the rise in oil activities, which amounted to 10.9% on an annual basis and 1.8%on a quarterly basis. The growth in non-oil activities reached 5.1% on an annual basis and 1.2 % on a quarterly basis.
Government activities recorded a growth of 2.4% on an annual basis, and 1.5% on a quarterly basis. The value of the gross domestic product in the fourth quarter of 2021 amounted to about SAR 705.52 billion, compared to about SAR 661.19 billion in the same quarter of 2020.
The growth rate of the Saudi economy has shifted to the positive range after the repercussions of the coronavirus pandemic, since the second quarter of 2021, with a growth of 1.9% and a growth of 7% in the third quarter of 2021.
Saudi economy is recovering with the support of banking sector’s growth and corporate lending
A recent report revealed the limited impact of the conflict between Russia and Ukraine on the Kingdom, supported by the growth of the banking system, mortgage loans, and corporate lending linked to Vision 2030.
This is because Saudi economic dealings are limited with counterparties in Russia and Ukraine, and the banking sector in Turkey and Tunisia will likely be most affected by the indirect negative repercussions of this conflict.
The report expected that Saudi, Emirati and South African banks would remain relatively far from these repercussions. The main indirect effects of the conflict include the rise in oil prices, which will strengthen the oil-exporting economies and negatively affect the oil-importing countries. It also includes the rise in food prices, which will lead to inflationary pressures and current account deficits, and increase investors’ aversion to risk, which may increase the vulnerability of investors.
According to the report, some emerging markets will witness significant weaknesses.
The report expected that the Saudi economy will continue to recover during 2022, supported by high oil prices and the recovery of production volumes, and the non-oil economy is likely to benefit from the Kingdom’s Vision 2030 projects and related spending.
It also indicated that the growth of the Saudi credit market will maintain its strength, supported by mortgage loans, real estate and corporate borrowing associated with Vision investments.
The report does not expect to see noticeable direct effects of the conflict on the asset quality indicators of Saudi banks due to the Russian-Ukrainian conflict.
It also revealed that the Saudi asset quality indicators improved in 2021 as a result of write-offs and strong provisions, as the percentage of non-performing loans reached 1.7% at the end of 2021, down from 2.1% a year earlier.
Moreover, the report expects the Saudi banking sector to witness stability in 2022 supported by an increase in lending books and an improving economic environment.
The report’s data indicated an increase in net income by 11.5% and an increase in the return on assets by 1.1% for each increase of 100 basis points in interest rates “parallel shift”, based on bank disclosures, and credit losses are likely to return to pre-pandemic levels during the next 12-24 months.
Saudi banking sector’s losses receded in 2021, thanks to the improvement in the economic environment. In addition, mortgages are secured mainly through salary transfers and are provided to government employees and government-owned companies, so, it seems that the risks have been contained in this stage.
The report says, short-term or on-demand deposits, which are interest-free, represent a large part of basic customer deposits, and it remains to be seen what percentage will move to interest-bearing products, as the banking sector as a whole enjoys a net external asset position, bearing in mind that reliance on external financing is limited thanks to a large domestic deposit base and historically limited external operations.
It is worth noting that the Saudi Central Bank seeks to meet global challenges and achieve the Kingdom’s vision 2030, including enhancing financial inclusion, developing the financing environment for small and medium enterprises, supporting real estate financing, developing payment systems and modern means of payment.
The central bank also aims to develop the financial technology sector and continue to regulate and develop the insurance sector. , with the application of effective supervision to maintain the stability of the financial sector.
A report of the Central Bank revealed that monetary and banking indicators continued to record good performance in 2021 AD, despite the fluctuations the world is witnessing due to the pandemic conditions.
Saudi digital economy to grow by 7% in 2022
Data revealed the growth of the digital economy in the Kingdom by 7% this year. The Kingdom’s digital economy rank improved to 17th place globally up from 20 a year earlier.
Saudi Arabia has announced plans to further improve its ranking by 2030. The Kingdom has achieved the 13th rank globally in the average internet speed, bringing the mobile internet speed to 50.80 MB/sec, while the fixed internet download speeds in the Kingdom have achieved 50.68 MB/sec.
As Saudi Arabia diversifies its economy away from the dependency on the oil sector, this contributes to strengthening the vital sectors digitally and bringing the country to high levels of a decent life.
Digital transformation constitutes a qualitative transition that will achieve the improvement of the well-being of life and the removal of temporal, spatial and procedural obstacles, which achieve the digital renaissance in the Kingdom according to the goals of the Kingdom’s Vision 2030.
The data indicate that government agencies, in cooperation with the private sector, are working to accelerate the pace of the digital economy and overcome the challenges and obstacles they face, which is reflected in the growth of the domestic product, in order to achieve the objectives of the Kingdom’s Vision 2030.
The National Digital Transformation Unit seeks, through cooperation with digital transformation partners, to accelerate and enable digital transformation in the Kingdom.
Accordingly, the Kingdom would be able to seize the opportunities available in the digital age and achieve economic sustainability to improve the quality of life and achieve excellence in providing government services.
The Kingdom occupies a prominent economic position, as its economy is the largest in the Middle East and among the twenty largest economies in the world, and the booming economy is one of the pillars of the Kingdom’s Vision 2030. Saudi Arabia aims to raise the size of its economy to become among the top fifteen in the world, by creating an attractive investment environment and diversifying its economy, raising the proportion of non-oil exports from 16% to 50% of non-oil GDP and raising the contribution of the private sector from 40% to 65% of GDP.
The Kingdom has also worked through the G20 to harness its efforts to enable the digital economy and address Its challenges by enabling the private sector to benefit from the digital economy and defining a framework for a reliable, human-centered economy.
The Saudi economy has witnessed growth in a large number of sectors, taking advantage of the Kingdom’s natural resources, and its geographical and cultural position among the three continents of the world.
The Kingdom has also witnessed during the past years structural reforms on the economic and financial side, which enhance the improvement of economic growth rates while maintaining financial stability and sustainability. This is evident in the improvement of the business environment in the Kingdom, and the continuous quest to empower the private sector to support economic diversification by improving the business environment.
The Saudi government aims to overcome obstacles to make it a more attractive environment in addition to investing in previously untapped sectors, as well as improving the investment environment and increasing its attractiveness to local and foreign investors.
Since the launch of the Vision 2030 by Crown Prince HRH Mohammed bin Salman, the Kingdom has succeeded in implementing many supportive initiatives and structural reforms to enable economic transformation.
This transformation included several major efforts centered on a sectoral dimension that includes promoting local content and national industry, launching and developing promising economic sectors, and maximizing the role of the private sector and small and medium enterprises.
Real estate sector’s contribution to Saudi economy rises to highest level since 2013
The real estate sector’s domestic product at constant prices increased by 5.6% during 2021, to reach SAR 150.2 billion, compared to SAR 142.2 billion in 2020, which is the fastest growth rate since 2013, when it rose 14%.
According to official data, the value of the real estate sector’s GDP is the highest since the base year was modified to 2010.
The real estate sector’s contribution to the Saudi economy (GDP at constant 2010 prices) increased in 2021 to 5.7%, compared to 5.6%in 2020.
The gross domestic product of Saudi Arabia at constant prices in 2021 amounted to about SAR 2.61 trillion, compared to about SAR 2.53 trillion in 2020.
The share of the real estate sector stabilized at 14.5% of the non-oil sector in 2021, compared to 2020, which is also the highest contribution since the base year was adjusted to 2010.
The GDP of the non-oil sector amounted to about SAR 1.5 trillion in 2021, compared to SAR 1.43 trillion in 2020.
The big boom in the real estate sector was supported by the projects of the Ministry of Housing aimed at raising the percentage of citizens owning their homes to 70% in 2030, as one of the most important programs of the “Kingdom’s Vision 2030”.
This is in addition to the boom that the sector is witnessing in light of the increasing demand for residential and commercial real estate, with the expansion of existing companies and the entry of more national and foreign companies into the market to benefit from the great economic growth and the mega projects offered within Vision 2030.
The real estate sector means the ownership of housing, and it includes an estimate of the rent of residential buildings, whether they are paid “rented to others” or “occupied by their owners.”
The Sakani real estate program announced achieving its goals for the past year 2021, serving more than 225,000 families, stressing that it will continue to provide financing and housing services to facilitate the ownership of housingunits for Saudi families.