Saudi Arabia, the region's largest economy and one of the G20 nations, will double its economic growth to 4.9% in 2022, compared to 2.4% in 2021, according to the World Bank.
“Saudi Arabia, the growth forecast for 2022 has been revised up by 1.6 percentage points to 4.9%,” the World Bank stated. “The oil sector is expected to rebound strongly, boosting exports, and non-oil activity should benefit from high vaccination rates and accelerating investment.”
While Omicron continues to remain a challenge globally, the kingdom’s 2022 budget is expansionary and will find the right balance between growth and aid to the more vulnerable segments of the economy.
His Royal Highness Mohammed bin Salman bin Abdulaziz Al Saud, Crown Prince, deputy prime minister, and chairman of the Council of Economic and Development Affairs, said that the financial and economic indicators confirm that the country is progressing positively, as the 2022 budget comes amid a global climate characterised by challenges in light of the repercussions of the (COVID-19) pandemic, and great local ambitions, “but in a financially disciplined framework that focuses on the efficiency and effectiveness of directing government spending and utilising available resources to achieve the best return from them, while maintaining financial stability as a fundamental pillar of sustainable growth”.
RECOVERY IS TOP OF AGENDA
Economic stability and expansion are also expected to be supported by conducive government policies, including Vision 2030 as the central agenda for economic diversification, according to a report by management consultant KPMG.
“The 2022 budget indicates economic recovery as the key pillar underpinning the improving fiscal outlook. The economic expansion should also help to support the budget position and debt levels as a proportion of GDP.”
Indeed, government finances are also benefitting from significant tailwinds, including higher oil prices, which will ensure that the country is in surplus in 2022.
Total revenues for 2022 will reach SAR 1,045 billion, an increase of 12.4% compared to the projected revenues in 2021. Total expenditures are estimated at around SAR 955 billion, with SAR 90 billion in surplus (2.5% of GDP).
“These surpluses will be directed to boost government reserves, support national development funds and the Public Investment Fund (PIF), consider the possibility of accelerating the implementation of some strategic programs and projects with economic and social dimensions, or to partially repay the public debt based on market conditions,” minister of finance Mohammed bin Abdullah Al-Jadaan said.
The government is forecasting real GDP growth of 7.4% this year, driven by the increase in oil GDP as per the OPEC+ Agreement, in addition to the expected improvement in non-oil GDP with the continued recovery of the economy and the implementation of initiatives that support growth and diversification.
“Accelerating and broad-based domestic economic growth, combined with robust international oil demand, will boost the public finances,” KPMG noted. “This will be through increasing revenues, reduced need for stimulus spending and as an expanding economy supports a range of indicators measured as a proportion of GDP.”
The year 2022 would also see further rollout of projects related to the National Industrial Development and Logistics Program (NIDLP), National Investment Strategy and Shareek Program, among others, as the kingdom aims to attract private and foreign investors. In addition, the Quality of Life Program, and the Housing Program are also expected to increase home ownership among citizens, the government stated
UPBEAT CONSUMERS
Consumer sentiment also appears to have improved considerably, which bodes well for the 2022 outlook.
The number and value of point-of-sales transactions hit a new high in November, Saudi Central Bank (SAMA) data shows, in a sign that consumers are ready to open their wallets and spend on consumer goods and services.
E-commerce transactions and their value also reached a new high in November, signalling brisk economic activity in the non-oil sector economy. Spending on clothing and footwear and transportation led the increase.
Meanwhile, small businesses are benefitting from the availability of higher funding. Credit facilities provided to micro, small and medium enterprises surpassed SAR 200 million by the third quarter of 2021, and now account for 8.3% of all credit facilities by banks operating in Saudi Arabia, according to SAMA.
With high commodity prices, strong consumer sentiment and a spate of opportunities available to private sector and foreign investors hungry for growth, 2022 could turn out to be a blockbuster year for the kingdom.
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