Riyadh – Mubasher: AlJazira Capital estimates a recovery in Saudi economic growth next year, supported by increased public expenditure and improved consumer and business confidence, as the effect of expat departure is expected to ease out.
The research firm said in its “Saudi Economic Outlook 2020” report, released on Sunday, that the Saudi economy is on the verge of a major privatization drive with an increasing focus on diversifying the Saudi economy, with Vision 2030 gradually moving from the design phase to implementation.
Moreover, the improved economic sentiment was supported as the Saudi government managed to keep fiscal deficit in check without digging a bigger hole in the budget as it tries to steer the economy away from its total dependence on crude oil exports, according to AlJazira.
Tadawul
The report attributed the surge in foreign inflows to the Saudi market in 2019 to debuting the benchmark index of the Saudi Stock Exchange (Tadawul), the Tadawul All Share Index (TASI), on the MSCI and FTSE emerging market indices.
“The MSCI EM inclusion pushed TASI’s weight to 2.83% in the index, and led to foreign inflows of around SAR 40 billion,” the report noted, stating that the initial public offering (IPO) of the Saudi Arabian Oil Company (Saudi Aramco) raised around SAR 96-110 billion
“The inclusion of TASI in the MSCI EM and FTSE EM Indexes, and the Saudi Aramco IPO are factors expected to renew investor interest in FY20, supporting the index to exceed 9000 points,” the report noted.
AlJazira expects the Public Investment Fund (PIF) to play a key role in investments in Saudi Arabia as the Aramco IPO proceeds would raise capital spending, thereby offsetting the subdued capital expenditure estimates.
Oil
While Saudi real non-oil growth is expected to strengthen to 2.9% in 2019, according to the International Monetary Fund (IMF), its best since 2015, Saudi oil GDP is expected to be impacted by a backdrop of an extension of the OPEC+ output agreement and weakness in global oil market.
"Saudi Arabia continued to go ahead with its plan of restrictive output through an OPEC-led supply deal to support the market," and is forecasted to produce 9.75 million barrels per day (b/d) in 2019, and 9.85 million b/d in 2020, down from 10.31 million b/d in 2018.
Challenges
The report identified upholding non-oil growth and creating jobs for Saudi nationals as key challenges.
Nonetheless, Saudi Arabia implemented a number of reforms in 2019, which helped the kingdom earn a spot in this year’s top 10 global business climate improvers, according to the World Bank Group’s Doing Business 2020 report.
