ECONOMIC TRENDS

The Saudi economy surged in the fourth quarter of 2021, underscoring the kingdom’s robust rebound from COVID-19.

“This positive growth was due to the high increase in oil activities by10.8%, non-oil activities increased by 5.0%, and government services activities increased by 2.4% year on year,” GASTAT said in its report.

Seasonally adjusted real GDP grew 1.6% in the fourth quarter compared to the third quarter on the back of strong oil sector, which grew 1.8%,and a 1.5% expansion in non-oil activities, while government service activities increased by 1.2%.

The fourth-quarter surge meant the Saudi economy was 3.3% stronger in 2021, compared to a 4.1% contraction in 2020.
 
“This increase in GDP was a result of the economy recovering from the COVID-19 crisis through the growth of non-oil activities by 6.6%,government services activities also increased by 1.5%, and oil activities by 0.2%,” the report noted.

Still, like the rest of the world, the Omicron variant continues to temporarily stifle economic growth.

 

 

IHS Markit’s purchasing manager index (PMI) stood at 53.2 points in January, signalling a solid improvement in the health of non-oil private sector economy. A score above 50 reflects positive sentiment. New orders from foreign customers decreased for the first time since March 2021, albeit only marginally, IHS noted in its latest report.

“The year-ahead outlook for the non-oil sector restrengthened in January after sentiment dropped to an 18-month low at the end of 2021. Hopes were often underpinned by expectations that a recovery from the pandemic will lead to stronger new business growth and a stabilisation of global markets,” according to IHS.

Real estate prices, another key indicator of the health of the economy, rose 1.7% on an annual basis in the fourth quarter of 2021, affected by the increase in residential land plot prices by 2.0%, which contributed to the rise in the general index.

Commercial real estate prices declined 0.7% during the period, but gallery/shop properties saw a 0.5% increase.

RATINGS AGENCIES GIVE NOD TO PIF

The Public Investment Fund, the kingdom’s sovereign wealth fund, secured favourable debut international credit ratings from Moody’s and Fitch, highlighting the credit worthiness and strength of its portfolio.

“The new credit ratings represent a milestone achieved following the reforms introduced in 2015 under the leadership of HRH Prince Mohammed bin Salman Al Saud, Crown Prince and Deputy Prime Minister,” PIF said.

Global credit ratings agency Moody's has assigned PIF a first-time issuer rating of A1 and a scorecard indicated rating of Aa2, with a stable outlook.

“The Moody's rating affirms PIF's strong governance principles, where it has a commitment to maintain a strong credit profile at the subsidiary level by being represented on the board and involved in determining the financial policies of these entities,” the PIF noted in its statement in response to the favourable credit ratings. “In addition, PIF's governance framework is guided and reviewed by five management-level committees focused on investments, risk and liquidity.”

Moody's awarded PIF Aaa, the highest rating achievable, in five sub-categories such as business diversity, financial policy, debt coverage, leverage, and liquidity.

Meanwhile, Fitch Ratings assigned PIF a long-term foreign- and local-currency issuer default ratings (IDR) of 'A'. The outlooks on the long-term IDRs are stable. The fund is spearheading the government's Vision 2030 strategic agenda, and its objectives are closely aligned with national economic goals.

The fund's total assets at the end of 2021were 57% of national GDP, according to Fitch, and is “the leading strategic investment arm of the Saudi government to promote the diversification of the national economy under its long-term strategic agenda Vision 2030, notably the non-oil GDP sector, and to create about 1.8 million jobs directly and indirectly.”

In assigning PIF with a long-term issuer rating of A, Fitch highlighted the fund’s low level of debt and net cash positive position, giving it a very strong financial outlook.

The ratings are a significant achievement and a reflection of several factors, including PIF’s world-class governance, strong financial profile and the diversity of its business and portfolio, said Yasir Al-Rumayyan, governor of PIF.

“This result will further enhance our access to international capital markets and continue to diversify our sources of funding, which is in line with PIF’s strategy,” Al-Rumayyan said.