Saudi Arabia: Positive outlook and expectations of developing the non-oil economy

Standard & Poor’s (S&P) upgraded its outlook for Saudi Arabia to positive from stable, citing expectations of strong growth in the non-oil sector and economic resilience. The agency affirmed the Kingdom’s credit rating at “A/A-1”.

In its report on Friday, the agency stated that the positive outlook reflects the Saudi government’s ability to achieve more reforms and investments, which contributes to the development of the non-oil economy.

The credit rating upgrade also reflects the resilience of the country’s economy in the face of ongoing fluctuations in the oil and gas sector.

S&P added, “We expect to see accelerated investments to develop new sectors, such as tourism, and diversify the economy away from its heavy reliance on the hydrocarbons sector.”

The agency expects the Kingdom’s GDP to continue growing between 2024-2027, driven by the notable growth in investments in the non-oil sector and increased consumption rates. Additionally, the Kingdom is expected to emerge as a more diversified economy in the long term, offering more job opportunities for youth.

Saudi Arabia, the world’s largest oil exporter, has launched an economic reform plan known as “Saudi Vision 2030” to reduce its reliance on oil and achieve more economic growth.

S&P noted that the continued implementation of Vision 2030 initiatives would support strong non-oil growth in the medium term.

However, the oil and gas sector, along with the national oil giant Aramco, will continue to play an essential role in driving the Kingdom’s oil-linked economy.

Inflation rates in Saudi Arabia have remained relatively low compared to global levels. S&P expects inflation to remain stable and interest rates to move largely in line with those of the U.S. Federal Reserve.