Saudi Arabia is expected to accelerate investments in emerging industries, such as tourism, diversifying the economy away from its primary reliance on the upstream hydrocarbon sector, according to S&P Global.

The outlook on the kingdom was upgraded to “positive” from “stable”, with “A/A-1” long- and short-term foreign and local currency unsolicited sovereign credit ratings affirmed.

“The outlook revision reflects our view of Saudi Arabia’s strong non-oil growth outlook and economic resilience against ongoing volatility stemming from the hydrocarbon sector,” S&P said.

The kingdom’s economy continues to undergo a significant and rapid economic and social transformation under Vision 2030.

Current investments will spur consumption, thanks to the kingdom’s more than 35 million young population and increase the productive capacity of sectors such as manufacturing, logistics, and mining.

Over the longer term, Saudi Arabia will likely emerge as a more diversified economy, with more jobs created for the youth and broader workforce participation. However, execution risks may arise from a sharper fall in oil prices and volumes and the ensuing impact on public finances, tight supply, skills shortages, and developing basic infrastructure such as housing.

In addition, the sheer scale and size of projects - estimated at above $1 trillion - suggest large funding requirements across the government and government-related enterprises, particularly the Public Investment Fund (PIF).

The government is undergoing a recalibration exercise to prioritise projects based on economic returns and reassess timelines to avoid economic overheating and funding pressures.

“We, therefore, project a more gradual execution of investments and that the government’s net asset position will gradually fall, but remain comfortably strong, through to 2027,” the report added.

Lower oil production due to OPEC+ production cuts, despite non-oil growth momentum, will drive overall economic expansion to 1.4% in 2024, relative to last year’s 0.8% contraction.

“We expect to see a pick-up in construction for Vision 2030 projects and the services sector, supported by consumer demand and an expanding workforce.”

The kingdom is projected to see a stronger growth averaging 4.3% over 2025-2027, S&P added.

(Editing by Seban Scaria seban.scaria@lseg.com)