The Banking Executive Magazine - April 2021

Strong Growth Forecast for Saudi Economy Strong Growth Forecast for Saudi Economy Economists forecast that the Saudi economy will grow significantly big- ger over the coming decade with the size of every sector expected to in- crease. The Kingdom’s finance, insurance, real estate and business sectors are likely to expand by 9 percent annu- ally and their relative share to overall economic activity will grow by 12.7 percent. A paper titled “Economic Diversifica- tion Under Saudi Vision 2030: Sec- toral Changes Aiming at Sustainable Growth,” published by the King Ab- dullah Petroleum Studies and Re- search Center (KAPSARC), discussed the macroeconomic and structural transformation of the Saudi economy under the Vision 2030 program. KASPARC’s researchers in the energy and macroeconomic programs, David Havrlant and Abdulelah Daradary, explained that economic diversification would make the King- dom’s economy more resilient to ex- ternal demand shocks, help to create higher-skilled jobs, and establish a knowledge-based economy. Havrlant said that the research find- ings showed that the relative share of the Kingdom’s wholesale and retail trade, restaurants and hotel sectors to the gross domestic product (GDP) was expected to reach 16 percent by 2030, followed by transport, storage and communication. HIGHLIGHTS -The Kingdom’s finance, insurance, real estate and business sectors are likely to expand by 9 percent annu- ally. -The relative share of the wholesale and retail trade, restaurants and hotel sectors to GDP was expected to reach 16 percent by 2030. -The services sector is expected to grow about 10 percent annually on average. “The continued growth in the basic oil and gas sector is expected to be- come somewhat milder than the rapid expansion of the diversification focal sectors,” he said. Meanwhile, the services sector is ex- pected to grow about 10 percent an- nually on average, implying that its relative GDP share will climb to al- most 40 percent in 2030. Darandary said that the manufactur- ing and services sectors would be- come one of the strongest pillars of sustainable economic growth and lead the diversification process. “The main thing that changes is the way the economy is segmented, let- ting the initially tiny sectors increase their share in comparison with the larger ones. The relative sizes of the economic sectors will be more evenly distributed, yielding a more diversified economy,” he said. The researchers said that as the econ- omy transformed into a more ad- vanced and diversified one, the private sector was set to take the lead, being the carrier of high-level knowledge and skills, innovative ca- pabilities, and research and develop- ment. Household income and private con- sumption are expected to benefit from these adjustments, with private consumption likely to account for more than 40 percent of overall ex- penditure in 2030, they said. the BANKING EXECUTIVE 50 ISSUE 148 APRIL 2021