The Chairman of PwC Middle East anticipates growth in the Saudi economy in 2024, supported by non-oil activities.

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Saudi is likely to witness growth in 2024, led by fresh diversification initiatives and reforms that will lay the foundation for the next growth and investments in the Kingdom, PwC Middle East Chairman Riyadh Al-Najjar told Argaam.

He added that the main engine of growth for this year and the coming years will be non-oil activity, powered by a boost in investments. 

Recent years have seen significant changes in a number of industries, including digital transformation, healthcare, tourism, and hospitality.

Al-Najjar said five key areas have outstriped the 20230 goals.  These are digital transformation including the development of an artificial intelligence strategy, first residents of The Line project, continual efforts to transform the economy, transition to clean energy, and, developing workforce including localization.

Looking ahead, the Kingdom expects strong and sustainable growth through economic reforms and investment plans. 

In the second quarter of 2023, non-oil businesses grew by 5.8% year-on-year in Q2, a 13.9% increase from 2019. This recovery spans various sectors, including retail, transportation, tourism, finance, manufacturing, and construction.

Here is the breakdown of the interview:

Q: What factors contributed to the significant growth of Saudi Arabia’s non-oil private sectors in 2023?

A: Saudi Arabia’s non-oil companies expanded by 5.8% in the second quarter of 2023, an improvement from 2019. Retail, transportation, and service sectors were among those reporting increases. Travel, particularly religious travel, was very important. Improvements were also seen in manufacturing, construction, and financial services.

In the future, the country hopes to increase growth through sustained investments and adjustments to the economy.

Q: What are the key reasons for the slowdown in the non-oil government sector?

A: The decline in non-oil government services is based on a limited analysis that ignores continued government spending and investments in critical areas. Although the study indicates a 3.8% slowdown in the non-oil government sectors, it does not provide a complete picture of the government’s overall efforts in important industries.

Q: Could you elaborate on the economic diversification initiatives mentioned in the report and their contribution to Saudi Arabia’s economic growth and stability?

A: In line with Vision 2030 and other national initiatives aimed at revolutionizing the economy, the Kingdom has established a number of diversification goals.

The National Development Fund (NDF) wants to triple the size of the non-oil economy by 2030, and one of the targets is to increase non-oil exports to 50%. The aforementioned projects aim to accomplish various goals in order to support the Kingdom’s varied economic agenda.

The Saudi government is committed to launching new industries, including tourism, hospitality, media and entertainment, mining and metals, digital and financial services, and renewable energy, in light of our discoveries and the advancement of continuing development.

The investments made in the 14 giga projects serve as evidence of this goal. NEOM, the Red Sea, Diriyah, Amaala, AlUla, and Qiddiya are among them. These expenditures will have a big influence on achieving goals and raising the standard of living in the neighborhood. Lastly, in addition to these investments, there are also more extensive social and economic reforms being implemented, which will enhance the business climate and draw in foreign capital.

Q: What is the role of the Public Investment Fund (PIF) and assets under management (AUMs) on the Saudi economy?

A: The PIF, which invests in opportunities across a variety of sectors and promotes the growth of Saudi Arabia’s economy by contributing to GDP growth outside of oil, serves as a road map for the realization of Vision 2030.

A: With over 80% of its assets invested domestically, the PIF is tasked with promoting economic diversification and employment creation in the Kingdom.

The report states that the AUMs of the PIF increased five times from the baseline to SAR 2.9 trillion. The Kingdom benefits from PIF’s support in a number of key areas. 

Five percent of PIF assets were allocated to giga-projects like the $500 billion NEOM project in 2022, and the remaining five percent were for the development of new industries like gaming.

All things considered, the greater influence of these and upcoming investments catalyzes industries and raises the appeal to investors. Additionally, it promotes involvement from the private sector and generates new job prospects.

Q: How did the country manage to maintain non-oil revenue growth and diversify its revenue streams?

A: One of the main objectives of Vision 2030 is to diversify fiscal revenue from the oil sector to other industries. The report states that fiscal revenues have surged 2.5 times and are predicted to rise much more in the upcoming years. This is a result of the implementation of tax policies such as excise and value-added taxes (VAT), together with the later hike in VAT to 15% in order to enhance fiscal sustainability.

Revenue growth was also influenced by the expansion of the non-oil industry. Stronger corporate profits over the previous year were reflected in a notable increase in corporate income tax receipts, especially from international businesses.

The level of household consumption continued to rise, which helped the government’s revenue from taxes on products and services like VAT.

Q: What are the expectations for Saudi Arabia’s economic performance in the near future, considering the positive indicators mentioned in the report?
A: Our research indicates that in 2024 the Kingdom should experience economic growth along with new reforms and diversification that will lay the groundwork for future growth and investments. This year and going forward, non-oil activity will be the primary growth engine, helped along by a rise in investments.

Source by: Arabian Business

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