| The latest International Monetary Fund projects Saudi GDP to grow 1.8% this year and 2.1% in 2020 as growth levels normalise after a few years of moderation.
The IMF believes government spending and multi-year infrastructure plans in the kingdom will provide broad support to economic activity, as will a focus on small-to-medium enterprises and the roll out of reforms such as the value added tax.
The Saudi economy grew 3.59% in the fourth quarter of 2018, according to the General Authority for Statistics. It was the fastest quarterly growth in three years.
Other economic indicators also point to an increase in economic activity.
Trade figures are also rising, as the kingdom expands its bilateral investment and trade ties with many countries across the world, which led to a small increase in Saudi trade flows despite a slowdown in global trade, according to the General Authority for Statistics.
Average purchasing managers’ index reading for the first quarter of 2019 also indicated the strongest quarterly expansion in the non-oil private sector since the fourth quarter of 2017, according to Markit, which tracks business sentiment.
Growth in output was at a seven-month high in March, while higher business activity in turn saw companies raise their buying levels and boost stocks of purchases.
The government is keen to inject more stimulus in the non-oil economy to add to the momentum. In March, the government announced major projects in Riyadh valued at USD23 billion to improve the quality of living in the capital city, which should stimulate more economic activity.
In addition, Saudi Aramco’s USD 12 billion mega bond issuance represents a key juncture in the kingdom’s changing economic narrative and underscores international investor interest in Saudi Inc.
The success of the bond will build confidence within the investment community, but more importantly, the fact that a company will have a lower cost of borrowing than the Saudi government is quite unusual. Strong demand for longer-dated paper is also noteworthy, as it signals a belief that Aramco and its energy business will remain highly relevant for decades to come.
The issuance comes on the back of stronger crude oil prices, which rose nearly 25% in the first quarter of 2019 and continue to edge higher amid huge demand and constrained supply.
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