Saudi Arabia’s Vision 2030 unleashes economic potential beyond oil sector
Saudi Arabia continues to witness significant economic transformation thanks to Vision 2030 that aims to reduce oil dependence and diversify the economy.
As the Kingdom continues to advance with this ambitious roadmap, more local corporations and public investment bodies have been recognizing their potential to drive innovation and economic growth through investments in the non-oil sector.
In an interview with Al-Arabiya English, Arun Leslie John, Chief Market Analyst at Century Financial, noted substantial progress in economic diversification, especially in non-oil sectors which grew around 4.6 percent in 2023, driven by robust domestic demand.
Speaking at a Davos panel in January, Saudi Finance Minister Mohammed al-Jadaan highlighted the oil sector’s reduced contribution to the country’s GDP, saying it has decreased from 70 percent to 35 percent.
Saudi Economy Minister Faisal Al-Ibrahim also noted at Davos that the Kingdom’s non-oil economy has expanded by 20 percent since 2016, hence surpassing the growth rate in the US.
Data from Century Financial shows that from 2005 to 2010, the oil sector dominated the economy, representing 45 percent of GDP, 80 percent of revenue, and 75 percent of exports. However, from 2017 to 2022, diversification efforts reduced these figures to 30 percent, 57 percent, and 60 percent, respectively.
John believes that improvements in the regulatory and business environment have facilitated this diversification. New laws promoting entrepreneurship, protecting investors’ rights, and reducing business costs have also been instrumental.
Investment deals and licenses saw substantial growth in 2022, propelled by these reforms, with the Saudi Investment Fund (PIF) playing a role in stimulating private sector investment.
Looking forward, John expects non-oil sectors to drive economic momentum with the oil sector acting as a mature cash cow supporting diversification efforts. The 2024 budget allocates approximately SAR 189 billion ($50 billion), constituting 15.1 percent of total expenditure and signaling a strategic focus despite a slight decrease from 2023.
John has a positive outlook for three main sectors in Saudi Arabia: Communications, Health and Social Development, and E-Commerce, supported by strategic investments and alignment with Vision 2030.
The communications and technology market in Saudi Arabia is poised for growth, expected to reach SAR 172 billion ($45.8 billion) in 2024, driven by a 6 percent increase YoY. In Q3 2023, the communications sector displayed growth with a sales surprise of 0.92 percent and an earnings surprise of 22.08 percent.
The main driver of this growth is the increasing demand for mobile data services, which will account for almost 40 percent of the market share in 2024. The mobile data market is fueled by the widespread adoption of smartphones and the availability of high-speed networks, such as 4G and 5G, which enable users to access various online services and applications.
The Saudi government has been investing heavily in developing its telecommunication and digital infrastructure, aiming to achieve the Saudi Vision 2030 initiative. Over-the-top (OTT) platforms are also on the rise, challenging traditional pay-TV markets. The sector offers growth opportunities, but adaptation to evolving technologies and consumer expectations is crucial.
Despite a reduced healthcare budget in 2024, the healthcare industry is expected to outperform, with projections indicating market growth to reach US$ 23.60 billion by 2028, up from US$ 21.38 billion in 2024.