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Strong non-oil growth in Q2 has put Saudi Arabia on track to record an overall gross domestic product (GDP) growth of 1.2% in 2024, according to data by S&P Global Market Intelligence.
Some moderation of non-oil growth is expected for the second half of 2024 as public investment spending is curtailed and private sector investment is weakened by high interest rates.
The S&P Global Market Intelligence forecast attributes this slowdown to the government overhauling several project timetables connected with its Vision 2030 plan.
In December 2023, Bloomberg reported that the kingdom had delayed some of the projects launched as part of its economic transformation plan past 2030, quoting Finance Minister Mohammed Al Jadaan. One of the giga projects reportedly affected is Neom, the flagship linear city which is to be scaled back from 170km long to just 2.4km in the medium term.
On Wednesday, government data revealed Saudi’s real GDP shrank 0.4% year-on-year in the second quarter, driven by a 8.5% decline in oil activities which has limited overall growth for several quarters.
S&P Global Market Intelligence analysis indicates that public investment spending will be curtailed as a result to reinforce the conservative Saudi fiscal strategy. Private-sector investment will remain dampened as interest rates stay high until the US Federal Reserve takes the first step and cuts the policy rate, which is expected to happen in December 2024.
The outlook for Saudi remains positive with the intelligence arm of the credit rating agency expecting growth to accelerate to 2.8% in 2025, supported by increases in oil production in the second half of next year, while non-oil growth is expected to lose traction.
(Writing by Bindu Rai, editing by Seban Scaria)