As the financial world approaches the challenges and opportunities of 2024, the flux of global economics is poised to make headlines once again. Prevailing uncertainties concern the potential for a U.S. recession, the true state of inflation, the likelihood of loosened monetary policies, and the economic implications of geopolitical strains.
Adding to the intrigue, 2024 is slated to become a landmark year politically, with over 50 nations, including powerhouses like Russia, the UK, and India, gearing up for elections. The outcomes are sure to reverberate through the global economy.
In the Middle East, Saudi Arabia’s trajectory towards becoming an economic powerhouse is particularly noteworthy. International businesses and economies are turning their gaze towards the Kingdom as a preferred investment destination. Understanding the economic climate in Saudi Arabia for the upcoming year is therefore crucial.
A global snapshot
Projections indicate a slight deceleration in global GDP growth, from 3.1 percent in 2023 to 2.9 percent in 2024. Our analysis, titled “Sailing with the Wind,” anticipates major economies like the U.S. to experience a notable slowdown in growth and a dip in inflation.
The extent of the slowdown, especially following aggressive policy tightening, is a topic of debate, with the U.S. facing a significant slowdown as interest rate hikes take effect. While a manufacturing rebound might stave off a severe downturn early in the year, the threat of a recession looms later on.
Europe’s outlook is bleaker, with a high chance of enduring recession or stagnation, while China could initially defy expectations with stronger growth, though long-term growth concerns persist.
Saudi Arabia attracts global investments
Turning to Saudi Arabia, our 2024 economic outlook, ‘A Soft Landing, With Risks,’ anticipates continued success for the ambitious Vision 2030 program. While oil remains a cornerstone, with a steady production forecasted at 9.6 million barrels per day for 2024, the focus is shifting to non-oil sectors, which are expected to grow by a robust 5 percent, drawing international investment interest.
A series of innovative initiatives aimed at attracting global talent and investment are underway, including the expansion of the premium residency program with five new products. This program, introduced in 2019, facilitates foreigners living in Saudi Arabia and offers various benefits such as exemption from expat fees and visa-free travel.
Further bolstering investment prospects are the Kingdom’s largest USD bond issuance since 2017 and a planned increase in hydrocarbon production capacity. Domestic consumption remains strong, supported by low inflation in spite of higher interest rates.
Regarding monetary policy, we foresee ‘high for long’ local interbank interest rates, with potential easing in the latter half of 2024. Despite potential rate cuts by the Fed, the Saudi Arabian interbank offered rate may stay elevated due to changes in domestic liquidity. Credit growth in the private sector has moderated, particularly in mortgages, which could stabilize property prices in Riyadh. We’ve adjusted our policy repo rate predictions for 2024-25 upwards in anticipation.
Indeed, the year ahead promises to be bustling with activity and analysis, as Saudi Arabia and the global economy navigate through a period of significant change.