Saudi Arabia: Macroeconomic Country Outlook
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GlobalData forecasts the real GDP to grow at 4.8% and household consumption by 4.82% in 2022.
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Saudi Arabia was ranked 35th out of 136 nations in the GCRI Q4 2021.
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According to GlobalData’s report on Saudi Arabia Power Market Outlook, thermal power held a share of 99.8% in Saudi Arabia’s generation mix in 2020.
PESTLE Summary
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Political: The country has stable kingdom but no democratic setup. Members of the Al Saud dynasty have been governing Saudi Arabia since 1932. As the King has a firm rule over the country, there is stability in terms of the country’s government. In the World Governance Indicators, published by the World Bank, Saudi Arabia ranked 62.9 percentile on the control of corruption parameter in 2020, followed by regulator quality (61.5) and government effectiveness (58.6). Control of corruption measures the extent to which public power is exercised for private gain. Regulatory quality measures the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development.
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Economic: Saudi Arabia economy is expected to grow by 4.8% in 2022. According to GlobalData, the Saudi Arabian economy is expected to grow by 4.8% in 2022, compared to 2.5% real GDP growth in 2021. A higher economic growth is projected based aims of the government to diversify its income, empower the private sector, and implement wide structural changes through its Vision 2030 programs. However, Omicron scare resulted in dip in business confidence in December 2021 along with fall in new export orders. Weak client demand, along with higher inflation rate, retarded production for December 2021. Despite the rapid spread of omicron, the OPEC+ countries decided to increase crude oil production in January 2022 with hopes of demand revival in the coming months.
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Social: Extensive social security systems in place. All citizens are granted a plot of land and a small loan to build a house. There are several social rehabilitation, care and remedial services designed to assist the physically or mentally disadvantaged, to protect vulnerable members of the society, and deal with problems such as juvenile delinquency.
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Technology: Changing trends in energy consumption. Saudi Arabia is the largest consumer of petroleum in the Middle East; however, it is exploring options on renewable energy. The country aims to develop clean renewable energy capacity in the next 10 years, with about 40GW of photovoltaic solar power, 3GW of concentrated solar power, and 16GW of wind power. By 2023, the country aims to generate 10.0% of its electricity from renewable energy sources. In March 2021, the government announced that the country will require huge investments in solar technologies, as lesser than 1% of the oil producing nation’s energy comes from renewables and aims for 50% renewable energy by 2030. As of September 2021, the country plans to issue green bonds soon as the oil-producing kingdom seeks to embrace environmental, social and governance concerns to expand its investor base and finance a transition to a greener economy.
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Legal: Saudi Arabia to announce four new laws to reform judicial institutions. In February 2021, the Kingdom introduced four key legislations as part of its reform measures to reform judicial institutions, as well a improve the legislative environment. The four new laws include — the Personal Status Law, Civil Transactions Law, Penal Code for Discretionary Sanctions, and Law of Evidence. Reforms are expected to help with court proceedings and judgements, increase the level of integrity and efficiency of judicial institutions, and contribute to the increase of reliability of procedures and control mechanisms.
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Environmental: Saudi Arabia has initiated several reform measures to improve its business climate. The World Bank Doing Business indicators assess the business environment of a country. Based on changes in 10 parameters, it measures the ease with which a local entrepreneur can start a small- to medium-size business. In 2020, Saudi Arabia’s overall rank improved by 30 places to 62nd place out of 190 economies, from 92nd in 2019. According to the Doing Business 2020 Report, construction permits were made easier by launching an online platform, the country also strengthened minority investor protection by increasing access to evidence at trial. Moreover, enforcing contracts was made easier by publishing court performance measurement report and information on the progress of cases through court.
Key Fundamentals
Macroeconomic Outlook
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As the world’s largest producer and exporter of oil, the country plays a unique role in the global energy industry. The energy market, as well as the global economy, is affected by its policies on production and export of oil, petroleum products and natural gas. The country is aware of its responsibility and is committed to ensuring the stability of its supply and prices.
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GlobalData forecasts the real GDP growth to increase by 4.8% on back of fiscal support, rapid vaccination, and oil prices gaining traction for 2022. However, rise in omicron variant and higher borrowing by the government might hinder the pace of economic recovery in 2022.
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The objectives of Vision 2030 include liberalizing social norms and improving government services, diversifying the economy from hydrocarbons, and increasing job-creation by boosting the participation of non-oil private sector in the economy.
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In order to achieve the goal of economic diversification under Vision 2030, the government aims to increase foreign investment, participation of small and medium enterprises (SMEs) in the economy and increase their contribution to Saudi Arabia’s GDP from 20% to 35%.
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As part of Vision 2030, six ambitious landmark projects worth $7.0 trillion are being developed in the Kingdom, as of October 2021, to help diversify the economy and increase foreign investments.
GlobalData Country Risk Index (GCRI) - Q4 2021
Saudi Arabia was ranked 35th out of 136 nations in the GCRI Q4 2021. The country’s score is in the low-risk nations band (between 30-40). Saudi Arabia’s overall risk score is lower than the Middle East and North African countries and the world average in GCRI Q4 2021. The country had an overall score of 33.7 and performed well (compared to the Middle-east & North Africa average) in the macroeconomic and legal parameters. However, its risk score was relatively higher in political and environmental parameters.
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on the historical development in an economy.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Middle East and North African countries in this publication include Egypt, Israel, Saudi Arabia, United Arab Emirates, Morocco, and Iran.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More Details: Saudi Arabia PESTLE Insights - A Macroeconomic Outlook Report
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