Saudi Arabia Economic Outlook 2022

Saudi Arabia is making tremendous strides toward economic diversification and long-term growth. The Kingdom’s medium-term goals include Vision 2030 projects, sustaining social spending, and growing non-oil sectors through increased Public Investment Fund (PIF) and foreign investments. These objectives provide additional opportunities post-COVID. Nonoil growth is aided by structural reforms to improve the business environment.

This report aims to examine the outlook for Saudi Arabia's economy in 2022. We review the challenges to recovery, the Kingdom’s fiscal and external sector performance and outlook, and the progress of transformation plans as part of the government's Vision 2030 strategy as well as the opportunity those plans provide for foreign investments.

Growth in 2022 will be driven by both the non-oil sector’s robust expansion and a strong recovery in oil GDP. The Public Investment Fund (PIF) will continue to provide additional stimulus to the economy. The growing contribution of the non-oil sector (~10% of which was tax-based in 2020) to overall GDP, and to total revenues and exports highlight the success of diversification efforts so far. Emerging COVID variants are a source of concern. Global economic recovery, particularly in the Kingdom’s key trade and FDI partners, is also critical to Saudi growth.

Saudi Arabia’s fiscal position is significantly improving and the outlook for 2021 and 2022 is positive, reflecting success in the Kingdom’s fiscal adjustment and the restructuring of public finances. A recovery in oil revenues will continue to support this outlook. Combined with growth in non-oil and other revenues as well as prudent spending, the Kingdom could eventually meet its fiscal target expectations and return to a budget surplus by 2023. Public debt is expected to remain below the revised ceiling set by the government (now 50% of GDP).

The Kingdom’s balance of payment position is expected to recover from the twin shock of lower oil prices and COVID in 2020 and strengthen in the next years. Recovery in oil exports and a growing percentage of non-oil exports, as well as greater tourism revenues and direct and portfolio investments, will all contribute to this growth. Growing FDI inflows, which remain below peak levels, will be crucial to support Vision 2030 objectives and the Kingdom’s balance of payment position.

Quarterly figures showing lower Saudi unemployment and greater female labour participation rates (already exceeding the 30% target under Vision 2030) reflect the government's strides to resolve labour market imbalances. The government should continue to focus on strengthening the private sector and creating more jobs.

The current wave of reforms as part of Vision 2030 reaffirms the Kingdom's commitment to fostering an attractive business environment. The Kingdom is making notable progress in terms of fiscal adjustment and reorganisation of public finances, as well as social reforms and measures to attract foreign investment.




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