Saudi Arabia’s economy is projected to expand by 1.7% this year, with growth accelerating to 4.7% in 2025 and 2026, according to Moody’s. This outlook is driven by state-supported projects aimed at diversifying the economy beyond oil.
Moody’s forecast surpasses previous estimates, including the Saudi government’s 2024 GDP projection of 0.8%. The agency’s 2025 prediction aligns with Saudi Arabia’s planned expenditure of $343 billion, highlighting the government’s Vision 2030 strategy to enhance sectors such as technology, tourism, and renewable energy.
The Kingdom’s focus on “giga-projects” funded by the Public Investment Fund, like NEOM, is expected to sustain economic growth. Moody’s forecasts align with the IMF’s recent predictions and the World Bank’s growth estimates for Saudi Arabia.
Inflation in Saudi Arabia is anticipated to remain stable at 1.6% in 2024, rising slightly to 2% by 2026. These rates are among the lowest in the Middle East, reflecting effective economic stabilization measures.
Regionally, the UAE’s economy is expected to grow by 3.8% in 2024 and 4.8% in 2025, with higher inflation rates than Saudi Arabia. Egypt’s economy is projected to expand, though it faces high inflation challenges.
Moody’s notes a positive outlook for emerging markets, with stable growth and easing inflationary pressures expected to improve conditions by 2025. However, credit risks persist due to tighter credit spreads and rising bond issuance.
Emerging markets like India and the Asia-Pacific region are set to benefit from global supply chain shifts. Moody’s highlights that while Latin America’s growth remains strong, it varies widely by country.
The report emphasizes that emerging markets are benefiting from stabilizing GDP growth, though high debt levels pose challenges. Potential US policy changes could disrupt global trade and affect emerging market currencies.
In the banking sector, Gulf Cooperation Council banks are poised for growth, supported by government diversification efforts. Saudi Arabia’s Vision 2030 is expected to boost the banking sector further, with major projects creating business opportunities.
However, Moody’s warns that profitability may decline for banks due to interest rate imbalances between loans and deposits. Geopolitical tensions and potential US policy shifts remain significant credit risks for banks in emerging economies.