ECONOMIC TRENDS

Saudi Arabia’s real GDP expanded an impressive 6.8% in the third quarter of 2021, according to the General Authority for Statistics (GASTAT), as the economy benefitted from government support and projects launched by the public and private sector.

The surge was led by the oil sector, which grew 9% during the period, on the back of rising commodity prices and higher Saudi crude oil production, while non-oil activities increased by 6.2%, and government activities rose by 2.7% year on year.

“Seasonally adjusted quarterly real GDP grew by 5.8% in Q3/2021, compared to the previous quarter (Q2/2021),” GASTAT said. “This increase in GDP was a result of high growth in oil activities by 12.9%. Non-oil activities increased by 1.6%, and government activities recorded a growth of 1.4%.”

The latest robust figures come as the economy recovers rapidly from the pandemic and unemployment declines to 11.3%. Indeed, the kingdom’s total unemployment rate is 4.2 percentage points lower than in the same period last year, below its pre-COVID-19 level.

“The unemployment rate of total male working age population in Saudi Arabia decreased in the second quarter of 2021 to 3.5%, compared to 3.7% in the first quarter of 2021,” GASTAT said. “The unemployment rate of total female working age population reached 17.1% in the second quarter of 2021, compared to 16.1% in the first quarter of 2021.”

Moody’s Investors Service also affirmed the country’s credit rating at A1 and changed its outlook from negative to stable, in a sign of confidence in the kingdom’s economic prospects.

“The change of outlook to stable reflects increased likelihood that, in the next several years, the government will reverse most of the 2020 increase in its debt burden, while also preserving its fiscal buffers,” the ratings agency noted.

Moody's believes the government's improving track record of fiscal policy effectiveness – as evidenced by policy responses in periods of both low and high oil prices – consistently demonstrates a commitment to fiscal consolidation and longer-term fiscal sustainability.

“The expected fiscal improvement over the next several years will be facilitated by higher oil prices, although the stable outlook also takes into account the expectation that oil prices will remain volatile,” Moody’s said.

International investors are taking note of the growth acceleration underway in the kingdom.

As many as 44 multinational companies (MNCs) received licenses to move their regional headquarters to Riyadh, according to a Saudi Press Agency report.

“The licenses were issued at the 5th edition of the Future Investment Initiative, attended by the world’s most influential leaders in business and government. Among the companies are prestigious multinationals in diverse sectors including technology, F&B, consulting, and construction,” the company said. “An initial batch of companies signed MoUs at the last edition of FII in January, with more companies signing up in the following months.”

In addition, the National Debt Management Center (NDMC) rolled out its third international issuance this year for sukuk and bonds under the Kingdom’s Global Trust Certificate Issuance Programme and the Global Medium-term Note Issuance Programme.

The total order book surpassed USD 11 billion, which was oversubscribed 3.5 times. The kingdom issued a grand total of USD 3.25 billion (equivalent to SAR 12.19 billion) divided into two tranches. The value of the first tranche stood at USD 2 billion (equivalent to SAR 7.5 billion) for a 9.5-year sukuk maturing in 2031, while the second tranche totalled USD 1.25 billion (equivalent to SAR 4.69 billion) for a 30-year bond maturing in 2051.

The kingdom’s business sentiment also improved at a fast clip, highlighting the strength of the economic recovery, according to the latest purchasing managers’ index (PMI) by IHS Markit.

The index reached 57.7 points in October (a score above 50 shows positive sentiment), the second-highest recorded since the start of the COVID-19 pandemic and above the long-run series average.

“The upturn in demand was widely driven by recovering spending in the domestic economy following the loosening of COVID-19 restrictions, including on travel,” IHS said. “New export work increased to the greatest extent since May, as panellists commented on improving global trade flows.”

Driven by rising sales, non-oil companies reported a marked expansion in output in October. The rate of growth accelerated from the previous month to the strongest since the end of 2017. This helped firms to keep on top of new work and reduce their backlogs, although the rate of decline in outstanding business eased to the softest since April.

Business sentiment is expected to surge further as new investments pour into the economy.