Saudi Arabia, an economic giant in the Middle East, is undergoing a transformation guided by the Saudi Vision 2030 strategy. The overarching theme is to lessen its reliance on oil. As the de facto leader of OPEC (or the Organization of the Petroleum Exporting Countries), this goal is challenging but pivotal nonetheless. In 2023, data from the General Authority for Statistics (GASTAT) shows that Saudi Arabia’s real GDP slid by 0.9 percent.
GDP, or gross domestic product, refers to the total value of the final goods and services that a country produces. Meanwhile, real GDP is adjusted for inflation or price changes.
Saudi Arabia’s GDP in 2023
With reduced reliance on oil, Saudi Arabia saw its GDP decrease in 2023. The 0.9 percent year-on-year (YoY) contraction was primarily influenced by a 9.2 percent decrease in oil activities. Oil activities encompass crude oil, natural gas and refining activities.
That said, it is important to note that the slowdown in Saudi Arabia’s economy comes amid an increase in both non-oil and government activities. Government activities, which refer to activities of government agencies and government-controlled entities that produce non-market services, grew by 2.1 percent. On the other hand, non-oil activities, comprising all economic activities other than oil and government activities, increased by 4.6 percent.
The outlook for 2024
According to its January 2024 forecast, the International Monetary Fund (IMF) said the global economy will remain steady.
“Global growth under our baseline forecast will steady at 3.1 percent this year, a 0.2 percentage point upgrade from our October projections, before edging up to 3.2 percent next year,” noted the IMF.
For Saudi Arabia, specifically, the IMF also lowered its latest projections, and it’s now below the estimated global GDP growth. It recently adjusted its economic growth predictions for Saudi Arabia, expecting its GDP growth to be 2.7 percent. This is a substantial decrease from its October forecast of 4 percent.
This change is mainly due to Saudi Arabia’s reduced oil production, especially after Saudi Aramco announced that it would no longer pursue its plan to increase its maximum oil output capacity to 13 million barrels per day.
However, the IMF has a more optimistic view for 2025, improving its growth forecast to 5.5 percent. This is 1.3 percent higher than its earlier prediction. The IMF commended the strength of Saudi Arabia’s non-oil economy, describing it as “robust”.
Non-oil remains a significant driver of growth
Earlier in February, the country’s Finance Minister Mohammed Al Jadaan announced that Saudi Arabia’s non-oil economic growth could surpass 5 percent in the medium term. This figure is slightly below the previously anticipated 6 percent growth rate.
Despite this adjustment, Saudi Arabia’s non-oil sector growth is anticipated to exceed that of the broader region for the current year. This indicates a resilient diversification effort away from its reliance on oil revenues.
This development is part of Saudi Arabia’s broader strategy to modernize its economy, as encapsulated in Saudi Vision 2030.
Diversifying its economy
Launched in 2016, the Saudi Vision 2030 is the country’s “ambitious roadmap for economic diversification, global engagement and enhanced quality of life.” It is a brainchild of His Royal Highness Prince Mohammed bin Salman bin Abdulaziz, Crown Prince and Prime Minister.
In a message, the Crown Prince said, “We intend to provide better opportunities for partnerships with the private sector through the three pillars: our position as the heart of the Arab and Islamic worlds, our leading investment capabilities, and our strategic geographical position.”
“We will improve the business environment so that our economy grows and flourishes, driving healthier employment opportunities for citizens and long-term prosperity for all. This promise is built on cooperation and on mutual responsibility,” he elaborated.
Since its launch, the country has made great strides — with tourism, manufacturing and logistics among those non-oil sectors poised to contribute to Saudi Arabia’s economic development.
For instance, tourism now makes up 8 percent of Saudi Arabia’s GDP, with expectations to rise to 10 percent by 2030, according to Tourism Minister Ahmed Alkhateeb. He was speaking at the Saudi Green Initiative forum during COP28 in Dubai.
In 2023, Saudi Arabia welcomed over 100 million tourists, surpassing the 2030 target years in advance. In response, the country has set a new goal to attract 150 million tourists by 2030.
Meanwhile, the country’s rank in the World Bank’s Logistics Performance Index (LPI) rose remarkably from 55 in 2018 to 38 in 2023. This aligns with the ambitious objectives of the National Transport and Logistics Strategy (NTLS) to propel Saudi Arabia into the top 10 logistics hubs by 2030.
Read: Saudi Arabia’s non-oil sector activity rises at the quickest rate in five months
Final thoughts
For any country, navigating an economic landscape is complex. Beyond Saudi Arabia’s GDP for 2023, the journey ahead for a nation keen on diversification is challenging and promising. While there has been a contraction in GDP growth and a decrease in the 2024 forecast, several economic aspects still present golden opportunities.
Looking ahead, Saudi Arabia’s focus on strengthening its non-oil economy remains critical and imperative.
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