A hub for economic sustainability: Substantial economic growth at the half-way mark to Vision 2030

First appeared in Economy Middle East

Since the launch of the Kingdom’s Vision 2030, there has been a far reaching impact on the economy and its citizens, as the nation continues to accelerate reforms to reduce oil dependency, diversify income sources, and enhance competitiveness on a global scale. Its success has now positioned Saudi Arabia as a global driver for innovation, creating massive economic opportunity in the region and driving the sustainability agenda as it looks beyond Vision 2030.

Our inaugural report, Saudi Economy Watch: Vision 2030 on track at the half-way mark, discusses key economic trends, such as non-oil diversification, improving infrastructure, advancing digitalisation and creating competitive business environments, while measuring the nation’s? performance in different sectors that have been impacted by the ongoing economic transformation.

The report begins by focusing on the areas of outstanding success. These include:

• Improvement in female labour force participation - female economic empowerment has improved the earning potential of households.
• Increase in home ownership – ?This is likely to surpass targets by 2030 underpinned by the Vision's objective that states that 'housing is the foundational asset that is capable of shaping and influencing the vibrancy of families, communities, and broader society.’
• Decline in unemployment - the inclusion of Saudi women into the labour force has resulted in a dip in unemployment. Unemployment hit 8.0% in Q4 2022, the lowest on record, down from the baseline of 11.6% and well on the way towards the 2030 target of 7%.
• Robust economic performance - Saudi Arabia has been the fastest-growing nation among G20 countries, moving from the 19th to the 17th position.
• Largest Sovereign Wealth Fund in the world - PIF is rapidly becoming one of the largest SWFs in the world, just shy of the top 5, based on the latest rankings
• Increase in non-oil fiscal revenues - The Kingdom's non-oil fiscal revenue, which is expected to remain above $1trn in 2023, with the IMF forecasting growth to $1.3trn by 2028.?

To build on the Kingdom's transformation, a lot more needs to be done to boost performance on non-oil exports and the flow of FDI. Continued investments will support this to enhance and bring versatility to the economy. It will take time for transformative investments to bear fruit, but the government is committed to strengthening new sectors such as tourism, hospitality, media and entertainment, mining and metals, digital and financial services, and renewable energy. We are already seeing some of the transformative work that's happening in NEOM, AlUla, Diriyah, and the Red Sea project.Having worked closely with some of these giga projects, I have understood the long-term implications of the Kingdom's initiatives on the economy and our community.

KSA's Vision 2030 is based on three major pillars: "Ambitious Nation," "Thriving Economy" and "Vibrant Society". These have shaped the national strategy and within each of these targets, we have been able to see substantial change and impact:

• ?Ambitious Nation: Non-oil revenue: from 163bn to 411bn, aiming for 1trn by 2030.
• Thriving economy: Saudi home ownership soared from 47% to 67% since 2022, closing in on the 2030 goal of 70%
• Vibrant society: Female labour force participation now at 36% in 2023 exceeding its 2030's 30% target

It has also been interesting to see the non-oil economy becoming a key driving force in KSA’s transformation journey. We as a nation have been able to bounce back from the pandemic and reimagine Saudi Arabia based on new initiatives and ideas that support the country as a whole. The report identifies the following areas? within the non-oil sector that have grown beyond the pre-pandemic days. These are:

• Trade and hospitality - ?25%
• Manufacturing - ?17% (excluding oil refining)
• Finance and business services - ?16%

The Kingdom’s non-oil private sector is leading in growth, having accelerated to 5.8% in Q2 2023 and currently stands 13.9% higher than in 2019.?

We are expecting to see the true impact of the Vision unfold well beyond 2030. The reforms and diversification have set the foundation for future development and investments that aim to transform the economy and shift away from oil dependency.?

Oil production cuts have? also encouraged Saudi to continue its ongoing progress towards expanding its competitive reach amongst the listed sectors. The shift from oil to non-oil sectors is intended to address multiple objectives to support the Kingdom’s initiatives and achieve a diverse economic agenda. These areas of focus are:

1. Wholesale and retail trade and transport sectors, driven by the rebound in tourism, especially religious tourism
2. Recovery in the Financial Services sector
3. Rebound in non-oil manufacturing activity
4. Construction

At PwC, we work with our clients to help accelerate their efforts to achieve transformation goals across the Kingdom. We do this through nurturing the best talent and embracing the most innovative technologies to help our clients deliver sustained outcomes. Our latest report captures the growing economic changes that sets the road for the other long-term endeavours, as the Kingdom gets ready for a population target of 9 million by 2045.?

Read the full Middle East Economy Watch here.