S&P Global Ratings has upgraded Saudi Arabia’s outlook from stable to positive, citing strong growth in non-oil sectors and the country’s economic resilience.
The positive outlook reflects the Saudi government’s potential to introduce further reforms and investments, enhancing the development of its non-oil economy. The country’s economic stability amid hydrocarbon sector volatility was also noted.
S&P expects increased investments in new industries like tourism, supporting the shift away from the hydrocarbon sector. Saudi Arabia’s Vision 2030 aims to reduce its reliance on oil, driving continued non-oil growth in the medium term.
Despite this shift, the hydrocarbon sector and national oil company Aramco will remain significant to Saudi Arabia’s economy. Inflation in the country has been relatively low and is expected to stay steady, with interest rates likely to align with US Federal Reserve rates.
S&P affirmed Saudi Arabia’s ratings at “A/A-1”. Non-oil activities grew by 4.9% year-on-year in Q2 2024, driven by financial and insurance sectors. Official data showed a 7.1% surge in these sectors compared to the previous year.
The growth in non-oil sectors aligns with Vision 2030’s goals. Saudi Arabia’s seasonally adjusted GDP increased by 1.4% in Q2 compared to Q1, though it saw a slight year-on-year decline of 0.3% due to an 8.9% drop in oil activities from reduced crude output per OPEC+ agreements.
Saudi Arabia cut oil production by 500,000 barrels per day in April 2023, a reduction extended until December 2024. The Kingdom’s GDP at current prices reached SR1.02 trillion ($270 billion) in Q2.
Crude oil and natural gas activities contributed 23.2% to GDP, followed by government activities at 16%, and wholesale and retail trade, restaurants, and hotels at 10.1%. Government activities increased by 3.6% year-on-year and 2.3% quarter-on-quarter.
Electricity, gas, and water activities rose 8.9% year-on-year, while wholesale and retail trade, restaurants, and hotels grew by 6.8%. Government final consumption expenditure increased by 10.9% year-on-year and 4.3% quarter-on-quarter.
Gross fixed capital formation rose by 3.2% year-on-year in Q2, driven by investments in financial services, infrastructure, and energy. Non-oil exports increased by 10.5% during the same period, according to the General Authority for Statistics (GAS).
The International Trade Bulletin for Q2 2024 showed a 1.4% increase in national non-oil exports, excluding re-exports, with the value of re-exported goods rising by 39.1%. Non-petroleum exports, including re-exports, grew by 4.3%, while commodity exports decreased by 0.2% year-on-year. Imports fell by 5.6%, mainly due to a 3.3% drop in petroleum exports.
The share of petroleum exports in total exports decreased to 75% in Q2 2024, down from 77.4% in the same quarter last year.