Vision 2030 propels Saudi Arabia’s trillion-dollar economy forward.
Saudi Arabia’s economy continues to surge forward, building on its recent achievement of trillion-dollar status as ambitious Vision 2030 reforms propel the Kingdom toward becoming one of the world’s leading economies.
The rapid transformation of the Saudi economy, driven by diversification and substantial investments across various sectors, is reshaping the country’s economic landscape and its position on the global stage.
The Kingdom’s economic transformation, driven by Vision 2030, is steadily progressing. Newly-released figures from the General Authority for Statistics (GASTAT) show Saudi Arabia’s non-oil activities grew 4.9 percent year-on-year in the second quarter of 2024, fueled by strong performance in the financial and insurance sectors, while wholesale and retail trade, alongside restaurants and hotels, grew by 6.8 percent. Government consumption expenditure rose by 10.9 percent year-on-year, with a 4.3 percent increase quarter-on-quarter.
In an interview with Al Arabiya English, Maya Senussi, and Akanksha Samdani, economists at Oxford Economics, said: “Saudi Arabia’s economic transformation, driven by Vision 2030, is progressing steadily. Recent GDP figures indicate that non-oil activities now constitute half of the economy. The non-oil segment is expected to continue its expansion, with activities projected to grow by nearly percent annually, surpassing pre-COVID-19 trends.”
Investment plays a crucial role
Investment is playing a central role in Saudi Arabia’s economic shift. While investment is forecasted to rise to 28 percent of GDP by 2030, up from 25 percent in 2016, economists say stronger foreign direct investment (FDI) inflows are expected.
Senussi and Samdani elaborated: “Investment plays a central role in this economic shift, although reaching the 2030 targets will depend on a significant increase in FDI. The biggest beneficiary sectors of higher investment include construction, manufacturing, and transportation, and new sectors such as entertainment, tourism, technology, and green energy.”
Tourism the key growth driver
The tourism sector has emerged as a critical contributor to growth and diversification, supported by a planned $800 billion investment over the next decade. Last year Saudi Arabia welcomed 27 million international visitors, who spent more than $37 billion in the Kingdom, according to a recently-released report by the Kingdom’s Ministry of Tourism, which revealed that the combined number of domestic and international tourists surpassed 109 million.
The National Tourism Strategy and a robust pipeline of major events, including the Asian Cup 2027, Asian Winter Games 2029, Expo 2030, and FIFA World Cup 2034, are expected to boost this sector further, say Senussi and Samdani.
They said labor market localization efforts have shown significant success, with nearly half of the Saudi workforce now employed in the private sector. The Saudi unemployment rate is approaching the seven percent goal, and female participation in the workforce has exceeded the Vision 2030 target of 30 percent.
Public finances are gradually diversifying away from oil dependency. Senussi and Samdani noted: “Public finances are gradually diversifying away from oil dependency, with non-oil fiscal revenues nearly tripling to $122 billion (SAR458 billion) in 2023, halfway to the Vision 2030 target of ($27 billion) SAR1 trillion. However, commodity exports still account for more than 60 percent of budget revenue, and modest fiscal deficits are expected throughout the decade.”
They added: “With public debt low at 26.2 percent of GDP, sovereign bond sales are likely to continue as a funding tool, and the Public Investment Fund’s domestic investments may be partially financed through external borrowing.”
Global economic standing
Speaking to Al Arabiya English, James Swallow, Commercial Director at Sovereign PPG, highlighted the significance of Saudi Arabia’s economic trajectory.
“Through achieving trillion-dollar economic standing, Saudi Arabia joins a short-list of other countries who have done so. In reaching this elevated economic status, the Kingdom now finds itself featured among places such as the UK, USA, France, Germany, India, and China.”
Swallow added: “With their name on this prestigious list, Saudi Arabia will undoubtedly garner substantial international recognition for its economic potential and capabilities on a global scale.”
Addressing the factors driving this growth, Swallow further explained: “The rapid growth that Saudi Arabia’s economy has been experiencing in recent years, is largely driven by the initiatives to achieve its Vision 2030 goals. Among the key initiatives, the diversification of the Kingdom’s economic portfolio and the move away from oil dependency have instrumental in influencing its economic trajectory.”
Future outlook
Swallow said maintaining this level of economic growth “may be challenging, considering how significant the growth has been in recent years and months,” but with increased international recognition and interest, growth remains the likely trajectory for its economy.
Senussi and Samdani believe, overall, Saudi Arabia is on track to meet many Vision 2030 targets, though some diversification goals are proving more challenging. Growth in the non-oil sector remains a key success, driven by higher domestic investment and enhanced competitiveness, with an expected 4.8 percent annual growth rate through 2030.
Despite challenges in FDI and non-oil exports, the Kingdom’s positive growth outlook, abundant projects, and regulatory improvements position it well for continued economic transformation, they observed.
As Saudi Arabia continues to build on its economic success, Swallow believes this will be utilized to further accelerate Vision 2030 initiatives and fund ongoing megaprojects, including the Kingdom’s $500 billion mega project, NEOM, which, once completed, will feature the world’s first floating marina, a mountain ski resort and a vast vertical city.
“It can be expected that the government will seek to reinvest this economic strength into new and existing projects, to expedite progression, attract additional foreign investment, and fund ongoing and future developments.”
Swallow also highlighted the sectors that are expected to play a significant role in sustaining Saudi Arabia’s economic growth beyond oil and gas. These include tourism, entertainment, hospitality, logistics, energy, real estate, and technological industry. Each of these sectors look to play a significant role in the sustainability of the Saudi Arabian economy, he said.
Job creation
The achievement of trillion-dollar economic status – first notched up in September 2023 – is expected to have a positive impact on Saudi Arabia’s ability to attract foreign investment.
Regarding job creation and unemployment rates, particularly for young Saudis, Swallow believes the Kingdom has carefully implemented its Saudization programme. Similar to regional practices, this initiative ensures that the Kingdom can utilize the young, educated demography to maintain economic stability and build a middle-class domestic consumer base to further economic growth.
In 2023, Al Arabiya English had reported how Saudi Arabia’s gross domestic product (GDP) exceeded the ceiling of $1 trillion (SAR 4.155 trillion) for the first time, with the Kingdom joining the trillion-dollar club and achieving the national goal well ahead of the target date of 2025.
A report from the Saudi Chambers at the time detailed that the Kingdom had achieved a growth rate of 8.7 percent – the highest among the G20 member-states – spurred mainly by its production capabilities, which is reflected in the increase in self-sufficiency rate of the Saudi economy to 81.2 percent, and the increase in the country’s investment rate (the invested percentage of output) to 27.3 percent.
Private sector has played a crucial role in this economic transformation. The report indicated that the Saudi private sector will continue its strong role and performance – thanks to its status as an effective partner in the comprehensive development process and in achieving the goals of Vision 2030. The private sector’s contributions to GDP increased to $440 billion (SAR 1.634 trillion), or 41 percent of its GDP, with a 5.3 percent growth rate.
Labor market improvements in the private sector have been significant, with the number of workers in the sector increasing from 8.08 million in 2021 to 9.42 million in 2022, representing a growth rate of approximately 16.6 percent.
Under the localization endeavor of the labor force, the number of Saudis working in the private sector increased from 1.91 million in 2021 to 2.19 million in 2022, with a growth rate of roughly 14.9 percent, reflected in an increase in the percentage of Saudi workers in the private sector to 58.2 percent.
Export growth has also been impressive, with the report highlighting the success of the Kingdom’s policies regarding diversification of the economic base and support for Saudi exports to global markets. The value of non-oil exports reached $84 billion, with a growth rate of 13.7 percent, accounting for 20.5 percent of commodity exports and reaching 178 countries around the world.
