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S&P Global — 18 September 2024
By Nathan Hunt
Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy
Saudia Arabia has approximately 17% of the world’s proven oil reserves. In addition, Saudi crude oil production costs have been estimated as some of the lowest in the world, at about $10 a barrel. That means Saudi Arabia has vast amounts of oil, and the oil it pumps has higher margins than most other oil-producing nations. It is understandable, then, that the oil industry dominates the Saudi economy. However, the Saudi government has been pursuing a long-term diversification of the economy to balance the highly profitable oil industry with other sectors and services. In “Growth Of Saudi Arabia's Non-Oil Sector Will Continue, Despite Setbacks,” S&P Global Ratings reviews the progress of this diversification project.
The Saudi government’s Vision 2030 plan is designed to transform the country through a series of expensive and high-profile initiatives. Vision 2030 includes the development of megaprojects such as NEOM, Qiddiya, AlUla, Jeddah Historic District and the Red Sea Project. In the short term, this will diversify the economy by expanding the construction sector. In the longer term, these projects are anticipated to create further diversification through consumer spending on tourism and education. The Saudi government’s Quality of Life Program focuses on developing the entertainment, culture and sports sectors with cinemas, theme parks, museums and sports facilities.
Non-oil GDP has grown significantly in Saudi Arabia over the past 10 years, with retail trade, government spending and finance leading the way. However, to encourage further diversification, nongovernment consumption needs to pick up in line with economic peers. This requires domestic consumption to grow. The government aims to increase the share of household spending on entertainment to 6.0% by 2030 from about 2.9% currently. Tourism is also on the rise in Saudi Arabia, with a government target of 150 million tourist visitors by 2030.
A lot of the targets for domestic consumption and tourism depend on the timely completion of Vision 2030 megaprojects. The completion of the NEOM megaproject alone will lead to a decrease in oil-related GDP share. According to S&P Global Ratings, oil GDP stood at 35% of total GDP in 2017. Once NEOM is completed, oil GDP is forecast to decrease to 24% of the total.
But megaprojects alone cannot diversify the Saudi economy. Domestic demand will also be driven by higher productivity growth, which attracts investment and industries. Saudi Arabia’s labor productivity growth has lagged both developed and emerging economies for the past 20 years. Enhancing economic opportunities for women, including work in previously off-limits sectors, and participation in sports and entertainment could help to close these gaps.
Today is Wednesday, September 18, 2024, and here is today’s essential intelligence.
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—Read the article from S&P Global Commodity Insights
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—Read the article from S&P Global Market Intelligence
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—Read the article from S&P Dow Jones Indices
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—Read the article from S&P Global Commodity Insights
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—Read the article from S&P Global Commodity Insights
With lawmakers back from the August recess and the US presidential election heating up, MediaTalk host Mike Reynolds sits down with S&P Global Market Intelligence policy reporter Stefan Modrich. Together, they discuss some of the biggest issues facing the tech, media and telecom segments, including regulating AI, privacy, cybersecurity, antitrust and M&A.
—Listen and subscribe to the podcast from S&P Global Market Intelligence
The Asia-Pacific region is home to a growing addressable audience of digital consumers as broadband subscriptions increase, inflation rates ease and more homegrown content emerges. In this webinar, we examine the trajectory of devices such as smart phones, smart TVs, game consoles and AR/VR headsets as well as some of the content flowing through these devices to end users. Join S&P Global analysts for a discussion on the current and future state of the connected devices segment in the Asia-Pacific region.
—Register for the free webinar from S&P Global Market Intelligence