Moody’s: Non-oil sector to maintain strong contribution to Saudi GDP

Leisure and tourism key for economic diversification
Moody’s: Non-oil sector to maintain strong contribution to Saudi GDP
Saudi (Photo Credit: Reuters)

According to a report by credit rating company Moody’s on the Saudi Budget 2024, it is projected that the non-oil sector will continue to make a significant contribution to the Kingdom’s GDP in the coming two years. This is expected to be driven by the expedited implementation of mega-projects.

Read more: Moody’s adjusts outlook for Saudi banking sector to positive

Despite a 6.5 percent decrease in oil production from the beginning of the year until the end of September, as compared to the same period last year, Moody’s emphasized that this decline did not deter their observations.

The agency clarified that sectors such as leisure and tourism were identified as key areas offering long-term diversification opportunities for the economy.

Moody’s anticipated that the oil sector will continue to be the primary source of income for the Kingdom in the foreseeable future. They acknowledged that while the non-oil economy holds potential for economic and financial gains, it may take some time for these benefits to materialize.

Last Saturday, the Saudi Ministry of Finance released the initial statement of the global financial budget for 2024, revealing expenditures totaling 1.25 trillion riyals and revenues amounting to 1.17 trillion riyals.

The fiscal 2024 budget is anticipated to have a modest deficit of around 1.9 percent of GDP.

Outlook revision

In March 2023, Moody’s affirmed Saudi’s “A1” rating, but revised the outlook from “stable” to “positive.”

The agency’s report highlighted that the reaffirmation of the Kingdom’s rating was attributed to the Government’s persistent efforts in formulating fiscal policies and implementing comprehensive structural and economic reforms. These measures are expected to bolster the sustainability of economic diversification in the medium and long term.

Strong financial position

Commenting on the Kingdom’s preliminary budget statement, Saudi Finance Minister Mohammed Al-Jadaan highlighted that the Kingdom enjoys a “strong financial position, robust government reserves, and manageable public debt levels, which will enable it to effectively manage any potential future crises.”

Based on preliminary estimates for 2024, there is an expectation of a 4.4 percent growth in real GDP. The Minister anticipates a recovery in the Kingdom’s economy, which would subsequently bring about positive developments in revenues in the medium term.

Al-Jadaan explained that revenue projections for fiscal year 2026 are approximately 1.25 trillion riyals, representing an increase from the 1.17 trillion riyals recorded in fiscal year 2024. Additionally, total expenditure for fiscal year 2026 is estimated to be around 1.36 trillion riyals, demonstrating growth from the 1.25 trillion riyals reported in fiscal year 2024.

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