In our latest Middle East Economy Watch: Advancing with National Visions firmly in sight, we examine economic performance across the region. Despite what the IMF has described as a “rocky recovery” that is beset by global inflation, high interest rates and geopolitical uncertainty, our report shows how the GCC economies have bounced back, even within the most affected areas such as tourism, trade and hospitality. Through the pursuit of National Visions across the GCC, including non-oil diversification, improving infrastructure, advancing digitalisation, creating competitive business environments and more, the regional economy is now stronger and more resilient than ever. Saudi Arabia is a global driver for innovation, embracing cutting-edge technology, creating economic opportunity and driving the sustainability agenda as it advances towards Vision 2030.
The diversification of the non-oil economy has been a key driving force behind this momentum for change. The Kingdom's non-oil economy contracted by 4% y/y in real terms during the COVID-19 pandemic. However, Saudi Arabia was able to lead the region's economic recovery, with non-oil GDP returning to 2019 levels as early as Q1 2021. Growth has since been sustained, with Q4 2022 GDP 11% higher than in Q4 2019. Meanwhile economic diversification plans are paying off - the share of the non-oil economy is at 59%, with non-oil GDP in 2022 being 15% larger in real terms and 28% in nominal terms compared to the pre-vision baseline. Indeed, the region saw some of the fastest growth globally in 2022; and Saudi Arabia was estimated by the IMF to be the strongest growing G20 economy by some margin, achieving 8.7% growth in 2022.
The initial Saudi Vision 2030 statement provided a broad focus, including the three pillars of “Ambitious Nation”, “ Thriving Economy” and “Vibrant Society”. As the national transformation strategy continued to progress, the Kingdom expanded those focus areas into dozens of specific objectives and sub-sector initiatives, such as the Health Sector Transformation Programme. New projects have also been added to support the country's transformation such as NEOM and the Saudi Green Initiative. In addition, the Kingdom's Vision 2030 has outperformed in some areas. For example, female workforce participation has surged to 37%, already ahead of the 2030 target of 30%.
In many other areas it is well on track, for example its progress in indicators related to reforms and investments, including rising to 38th in the Logistic Performance Index, up from 49th in the baseline and mid-way to the target of 25th. It has also made significant improvements in accelerating SME growth, with the targets to increase in loans to SMEs as a share of overall bank lending and increase the representation of micro- and small-cap companies on Tadawul being achieved in 2020.
Last year we witnessed major expansion across a number of non-oil sectors. In 2023, there are five key areas in which we will see continuous development:
Digital transformation, including the development of an artificial intelligence strategy across the Kingdom
Continuing efforts to green the economy and drive the energy transition
Talent development and localisation, including securing nationalisation targets and localisation of supply chain, industrial and skills economies
Population growth, as new visa reforms attract expats and increased business incentives for both corporates and SMEs within the region
Hospitality and tourism, including large investments in infrastructure and recent visa reforms
Hospitality and tourism, for example, is one of the biggest growth areas of the non-oil economy. One of the largest drivers is religious tourism through Hajj and Umrah. The Kingdom achieved a quarterly record of 6m tourists in Q4 2022, 47% above the same quarter in 2019.
In addition to this, the new tourist laws and initiatives have provided easier access to visas and the development of non-religious tourism attractions such as the Riyadh season, Al Ula and many more. The Kingdom has reported it aims to reach 25m tourists by 2023, around 43% more than in 2019. It has also announced ambitious targets to boost its expat population, which dipped during the pandemic but has already rebounded by 2.2% in 2022. Indeed by the end of 2022, expat numbers were above pre-pandemic levels. Saudi Arabia’s growth aspirations will also require a significant increase in the population, which is supported by plans to double the population of Riyadh and attract nine million people to The Line by 2045.
At PwC, we are proud to work to innovate and reinforce efforts to achieve transformation goals across the Kingdom. We nurture the best talent and combine the most innovative technologies to help our clients deliver sustained outcomes. In our latest report, we capture the growing economic changes across the wider GCC that successfully enhance their own National Visions, including our Kingdom's Vision 2030 agenda. Read the full Middle East Economy Watch here: https://pwc.to/3NnbRFy
