Talking about the land of Saudi Arabia, we are talking about an area of 2 million Km2, of which 66.7% of its 34.8 million population are below 35 years old. Land of Energy, minerals and unrevealed opportunities.
As per our Country Risk report the country possesses the world’s second-largest proven oil reserves (>15% of global resources) and, at current rates of extraction, its oil will last for over 60 years.
In addition, gas reserves will last for a further 70 years or so. Hydrocarbons account for around 33% of GDP and 70% of export earnings (2019).
In times of high oil prices, large surpluses in the fiscal and current accounts have been accompanied by a build-up in foreign assets and in special sovereign wealth funds (SWF) established to serve future generations. The total reserve assets managed by SAMA (Saudi Arabian Monetary Authority) are officially recorded at around USD450bn (as of end-2020). Another SWF, the Public Investment Fund, currently holds around USD400bn.
Going forward, according to Allianz Trade risk report, the Saudi economy rebound to growth of around +2.3% in 2022 on the back of stronger domestic and external demand. As oil prices have risen at the beginning of 2021, oil production cuts agreed by OPEC+ (OPEC + Russia + some other major oil producers) that have been in place since mid-2020 are likely to be tapered off in the course of the next two years, allowing Saudi Arabia's oil output to increase after a substantial contraction in the previous two years.
Meanwhile, growth in the Saudi non-oil sector should benefit from a gradual easing of the lockdown measures and a recovery of the tourism sector.
Today we would like to spot the light on 10 reasons to be cheerful about Saudi Market:
1. Competitive Advantage:
According to the fifth Arab economies competitiveness report published recently by Arab Monetary Fund, The Kingdom maintained the 2nd ranking after UAE for the period between 2017 until 2020 after having performed well in the overall economic index, the external activities sector and the official reserves index.
2. Shifting to ‘Open Business Environment’
Approximately 90 privately owned Saudi companies went for IPO's since 2010, of which almost 50% of them went for IPO in the past 4 years only specially after the historical IPO of ARAMCO, indicating the accelerated growth of business and the need to build the confident investment environment.
3. No more ‘Shadow Economy’
Wide action took place by authorities against "Tassattur" economy. "Tassattur" is an Arabic term of Commercial covers-up, which is an illegal trading practice by some Saudi Businessmen who allow foreign residents to run own commercial or industrial activities in their name in return for fixed payment. Local experts reported that Tassattur economy makes up 20% of Saudi GDP.
4. Resources exploration still ongoing
Recently, H.E. Prince Abdel Aziz Bin Salman Bin Abdel Aziz, the minister of Energy, declared that Aramco was able to explore new five Gas fields in the Kingdom in Central North region and empty quarter. The explored amount will add additional 82.7 million ft3 on total kingdom gas production.
5. Being the largest oil reserve, yet exploring alternative Energy resources
The Minister of Energy, declared in other recent occasion, that the Kingdom has a huge amount of uranium resources that they would like exploit through a transparent and well-developed nuclear power program with IAEA support, and the kingdom is open to every opportunity.
6. Wealth allocations to secure the future
On Feb 13th, Saudi Arabia transferred a stake worth $80 billion of Aramco, represents 4% of the company shares to its wealth fund " Public Investment Fund" (PIF). PIF ranked 6th of the top 10 sovereign wealth fund in the world, with $580 Billion, plans to reach $1.1 Trillion by 2025, while investing $40 billion annually into local economy. It is worth mentioning that PIF opened three new offices in New York, Hong Kong, and London, in line with its global expansion plans, as an active investor, the same will enable the Sovereign fund to work with its partners globally.
7. Paving the way toward ‘Digital Economy’
Talking about the level of "digital literacy" in the kingdom is endless. Saudis are leading the Technology scene among GCC countries. As per 2021 Arab Youth Survey, 93% of its population are internet users and penetrators and 72% are active social media users and content makers. By 2030 and with expected investment of $11 Billion, The kingdom will be shifted to digital economy.
8. Special focus on Food Tourism
As per WTO, the value of Global food and agricultural Industry reached $9.3 Trillion in 2019. The global National Industrial Cluster Program expected that Saudi Arabia share would increase to 7.2% by 2025 with an amount of $66.7 billion, attracted by Food Tourism activities.
9. Non-Oil export, exceeds expectations
In 2021 non-oil exports rose 37% year-on-year in value terms to $62 billion, excluding re-export activities, according to General Authority of Statistics. It was the highest compared to the past four years. That's not only helped mitigate some of the negative impact from the volatility in the Kingdom’s oil exports revenues, but also indicated the prosperity of this chunk to serve the plan of free oil economy in the future, as Oil contribution to GDP is diminishing to 22.2% compared to 23.2% in 2020
10. Growing role in retail sector
Saudi Arabia along with UAE are driving the e-commerce sector in GCC countries. In 2021 e-commerce made 3.8% of total retail sector in Saudi Arabia compared to 4.2% in UAE. Yet many experts are anticipating Saudi Arabia to stand at 18.95% by 2025, boosted by the local digital literacy and the country direction toward digitalization. E-commerce adoption in the region, is showing an annual growth of 25% worth to $28 billion by end of 2022. Riyadh hosted the 8th Retail Leaders in MENA between March 22nd and 23rd ,2022. The summit which held under the theme "Towards a responsible and comprehensive growth", will reveal tremendous opportunities in the kingdom among investors.
Malek El Khatib, Risk underwriter Allianz Trade in Middle east