Saudi Arabia’s non-oil economy is expected to grow by 4.4 percent in 2025 as the Kingdom continues to invest in key projects like the Riyadh Metro and the Red Sea hotels, stated PwC Middle East in its latest report. Since the end of the COVID-19 lockdown, Saudi Arabia’s non-oil economy has flourished under Vision 2030, attracting investments in diverse sectors, among the most notable of which is renewable energy and tourism.
Saudi Arabia’s non-oil economy continued to perform strongly in H1 2024, up by 3.8 percent year-on-year. This growth was led by the private sector, which grew by 4.2 percent, including by 4.9 percent in Q2, the strongest performance in a year.
“Saudi Arabia is steadily advancing its economic diversification efforts while transitioning towards a more sustainable future. To secure a stable and sustainable energy future, and achieve net zero emissions by 2060, the country is tackling the energy trilemma by balancing the need for reliable energy supply, minimizing negative environmental impact, and ensuring affordable energy costs – critical factors for both economic stability and environmental protection,” stated Riyadh Al-Najjar, PwC ME chairman of the board & Saudi country senior partner, PwC Middle East.
Sectors leading non-oil growth
The biggest contribution to Saudi Arabia’s non-oil economy came from the trade and hospitality sector, which grew by 6.4 percent in H1. There was also positive growth in all the other non-oil sectors including transport and communications, which grew 4.8 percent, and finance and business services which grew 3.8 percent. Although manufacturing only grew by 1.7 percent, this was a notable rebound and came despite further cuts in crude production.
This growth is consistent with the IMF’s forecast of 3.5 percent non-oil growth for the full year of 2024, which is similar to the official estimate of 3.4 percent in the Ministry of Finance’s mid-year economic review.
Diversifying and enhancing energy efficiency
Saudi Arabia’s non-oil economy is reliant on the shift away from oil. The Kingdom’s sustainability strategy addresses both the supply and demand sides of energy management to achieve its environmental goals.
On the supply side, Saudi Arabia is investing in lower-carbon alternatives, including natural gas and renewable energy sources like solar, wind, and nuclear power. These efforts aim to reduce emissions while diversifying the energy mix. On the demand side, the focus is on enhancing energy efficiency and reducing overall consumption across sectors. The strategy also emphasizes driving electrification in transportation and industry to further decrease carbon emissions, aligning with global sustainability trends and national targets for a greener future.
Until recently, the energy sector in Saudi Arabia largely meant the production and export of oil, with domestic power generated from oil and associated gas. The future is going to be a more diversified and lower-carbon mix, both for domestic power generation and exports, including a significant increase in gas, renewables, and possibly nuclear power.
In renewable energy, Saudi Arabia raised the official target for 2030 from an already ambitious 58.7GW to a range of 100-130GW, reflecting uncertainty about the rate of electricity demand. Hence, Saudi Arabia aims to meet at least 50 percent of demand through renewables, with the remainder provided by gas.
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Future outlook
As Saudi Arabia further grows its non-oil economy and inches closer to fulfilling its Vision 2030 targets, the government will likely announce a successor plan, for instance, Vision 2040 or 2050, outlining its goals for the next stage of development. PwC Middle East expects Saudi Arabia’s future plans to largely focus on the energy transition.
The next vision could also see more ambitious targets for renewable energy generation, moving from the 2030 target of 50 percent electricity generation from renewables towards 100 percent. This might involve halting the construction of new gas plants and phasing out existing ones, as well as expanding energy efficiency measures.
There could also be a major push to expand the utilization of EVs, not least because of the domestic production capacity that will be in place by 2030. The government could commit to utilizing EVs for its fleets, investing in the charging infrastructure, and providing subsidies for purchases, replacing the existing subsidies on fossil fuel consumption, estimated by the IMF at around 5 percent of GDP.
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