Daily Update: Saudi Arabia Diversifies Beyond Oil
Today is Wednesday, September 18, 2024, and here’s your?curated selection of essential intelligence on financial markets and the global economy?from?S&P Global .?Subscribe?to be notified of each new?Daily?Update.?
Saudia Arabia has approximately 17% of the world’s proven oil reserves. In addition, Saudi crude oil production costs have been estimated as some of the lowest in the world, at about $10 a barrel. That means Saudi Arabia has vast amounts of oil, and the oil it pumps has higher margins than most other oil-producing nations. It is understandable, then, that the oil industry dominates the Saudi economy. However, the Saudi government has been pursuing a long-term diversification of the economy to balance the highly profitable oil industry with other sectors and services. In “Growth Of Saudi Arabia's Non-Oil Sector Will Continue, Despite Setbacks ,” S&P Global Ratings reviews the progress of this diversification project.
The Saudi government’s Vision 2030 plan is designed to transform the country through a series of expensive and high-profile initiatives. Vision 2030 includes the development of megaprojects such as NEOM, Qiddiya, AlUla, Jeddah Historic District and the Red Sea Project. In the short term, this will diversify the economy by expanding the construction sector. In the longer term, these projects are anticipated to create further diversification through consumer spending on tourism and education. The Saudi government’s Quality of Life Program focuses on developing the entertainment, culture and sports sectors with cinemas, theme parks, museums and sports facilities.
Non-oil GDP has grown significantly in Saudi Arabia over the past 10 years, with retail trade, government spending and finance leading the way. However, to encourage further diversification, nongovernment consumption needs to pick up in line with economic peers. This requires domestic consumption to grow. The government aims to increase the share of household spending on entertainment to 6.0% by 2030 from about 2.9% currently. Tourism is also on the rise in Saudi Arabia, with a government target of 150 million tourist visitors by 2030.
A lot of the targets for domestic consumption and tourism depend on the timely completion of Vision 2030 megaprojects. The completion of the NEOM megaproject alone will lead to a decrease in oil-related GDP share. According to S&P Global Ratings, oil GDP stood at 35% of total GDP in 2017. Once NEOM is completed, oil GDP is forecast to decrease to 24% of the total.
But megaprojects alone cannot diversify the Saudi economy. Domestic demand will also be driven by higher productivity growth, which attracts investment and industries. Saudi Arabia’s labor productivity growth has lagged both developed and emerging economies for the past 20 years. Enhancing economic opportunities for women , including work in previously off-limits sectors, and participation in sports and entertainment could help to close these gaps.
Today is Wednesday, September 18, 2024, and here is today’s essential intelligence.
Written by Nathan Hunt.
Sustainability
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Prices for India's current-year International Renewable Energy Certificates, or I-RECs, for wind and solar technologies hit an all-time low on Sept. 12, driven by significant oversupply as unconsumed certificates continue to flood the market, with demand lagging far behind. As of the latest data, unredeemed I-RECs total 10.6 million certificates, including 1.96 million for vintage 2024 and 4.04 million for vintage 2023.
—Read the article from S&P Global Commodity Insights
Economy
Fed To Unveil Policy Expectations Heading Into 2025 As Rate Cuts Set To Begin
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—Read the article from S&P Global Market Intelligence
Capital Markets
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—Read the article from S&P Dow Jones Indices
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—Read the article from S&P Global Commodity Insights
Energy & Commodities
APPEC: Oil's Dual Dilemma — Supply Is Growing, But China's Slowing
It has the makings of a jigsaw puzzle. And the oil market for now is saddled with more questions than answers amid efforts to solve it. For more than 1,000 delegates who attended the Asia Pacific Petroleum Conference — or APPEC 2024 — one of the biggest themes that occupied the spotlight was how the world's oil producers can strategize to maintain market share, as well as ensure higher prices, at a time when appetite of one of the world's leading consumers, China, is close to hitting the ceiling.
—Read the article from S&P Global Commodity Insights
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Listen: MediaTalk | Season 2, Ep. 30 - Policy Outlook For AI, Online Privacy, Antitrust Regulation
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—Listen and subscribe to the podcast from S&P Global Market Intelligence
Events & Webinars
Webinar: APAC’s Growing Influence On The Connected Devices Market (Sept. 25, 2024)
The Asia-Pacific region is home to a growing addressable audience of digital consumers as broadband subscriptions increase, inflation rates ease and more homegrown content emerges. In this webinar, we examine the trajectory of devices such as smart phones, smart TVs, game consoles and AR/VR headsets as well as some of the content flowing through these devices to end users. Join S&P Global analysts for a discussion on the current and future state of the connected devices segment in the Asia-Pacific region.
—Register for the free webinar from?S&P Global Market Intelligence
Economist | Modeler | Controlling | Planning | Oil & GAS | Energy |
2 个月The composition of Saudi Arabia's GDP has become more diversified. The share of the private non-oil sector in total nominal GDP increased to 44.6% in 2023 from 39.6% in 2022, this became a game changer, i think it’s the time to change our prespective about gulf countries!
?? "Always learning, Always thinking, Always moving" | Red Team Tenth Man | AI, Energy, National Defense, Aerospace | Senior at Auburn University
2 个月Saudi Arabia’s push to diversify beyond oil is an ambitious but necessary move for long-term stability. The Vision 2030 megaprojects, especially NEOM, are fascinating and will undoubtedly reshape the economic landscape. However, it’s the focus on productivity growth and increasing opportunities for women that I think could be the real game-changers. Balancing such large-scale projects with boosting domestic consumption will be key. Looking forward to seeing how it all unfolds!
Managing Director, Greater China Country Lead, Corporates, S&P Global Ratings
2 个月Thie Saudis’ aim to diversify its economy is increasingly aligning the interests of the kingdom with those of China - more here: https://www.dhirubhai.net/posts/charleschangfixedincome_saudi-china-ties-and-yuan-based-oil-trade-activity-7232744212679512064-hV6G?utm_source=share&utm_medium=member_ios