Economic reforms help insulate Saudi Arabia from global crises

The country has remarkably achieved record growth in 2022, surpassing all G20 countries, thanks to a national economic stimulus package that is part of its Vision 2030

People walk beneath advertisement billboards at Boulevard entertainment city in the Saudi capital Riyadh, late on January 19, 2022.
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People walk beneath advertisement billboards at Boulevard entertainment city in the Saudi capital Riyadh, late on January 19, 2022.
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Economic reforms help insulate Saudi Arabia from global crises

At a time when the world is facing grave economic challenges caused by the Covid-19 pandemic, the Russia-Ukraine war, and higher interest rates, Saudi Arabia remarkably achieved record growth in 2022, surpassing all G20 countries, thanks to a national economic stimulus package that is part of its Vision 2030.

Economic indicators show that the Saudi economy recorded 8.7% growth in 2022, surpassing experts' estimates, due to the economic, legislative, and structural reforms it has implemented.

The package also included key regulatory reforms and ones related to facilitation and automation to improve the business environment, enhance women's participation in economic development, and establish new government agencies.

Some ministries have been merged as part of the package, while spending in promising economic sectors has also been raised.

100% foreign ownership

Allowing foreigners 100% ownership in most sectors, including industry, health, engineering, wholesale, retail trade, minerals, education, transport, publishing, and media, has also helped attract investment.

The government also implemented the Contractors Classification System, amended metals and precious stones regulations, and issued a new bankruptcy system and the Commercial Mortgage Law.

The package also saw the development of executive regulations for the Capital Market Authority, a system that companies can use to enhance the protection of minority investors, the Building Code, the Saudi Centre for Commercial Arbitration, and a new government competition and procurement system.

In addition, the government rolled out regulations for the guarantee of rights in movable funds and the commercial court system.

Faster, more efficient processing

An integrated electronic platform was also launched called Fasah, through which Saudi ports are cleared within 24 hours, and commercial licensing activities can be carried out around the clock. This has helped reduce the time required to complete real estate ownership to 60 minutes.

 An integrated electronic platform was also launched called Fasah, through which Saudi ports are cleared within 24 hours, and commercial licensing activities can be carried out around the clock. This has helped reduce the time required to complete real estate ownership to 60 minutes. 

The requirements to obtain an investment license have also been reduced by more than 50 per cent, in line with international standards. Saudi Arabia also launched the Mar'yat (Views) platform to help bridge the gap between investors and government agencies.      

Moreover, the National Competitiveness Centre has been working on implementing reforms to promote competition by conducting studies related to the obstacles and challenges facing the public and private sectors. 

After identifying and analysing the challenges, the centre proposed solutions and initiatives to implement legal and regulatory reforms, building on its strong relationship with government agencies and the private sector. 

High growth rate

Before the end of 2022, the Organization for Economic Cooperation and Development (OECD), a US agency, issued a report expecting the Kingdom to achieve 9.9% growth for the year, the highest rate among its G20 peers. 

This expectation came when the Saudi economy was experiencing great vitality thanks to helpful and stimulating national strategies, projects, and attractive investments. This was strongly reflected in the dynamism of the private sector and the GDP rate as foreign investors rushed to invest.    

Despite the bleak view that the OECD reported about the global economy's performance, its estimates for Saudi economic growth remained high in light of the country's efforts to diversify its revenue streams, contain inflation, and solidify its external standing.

The reforms played a prominent role in implementing economic diversification by promoting the growth of non-oil revenues, launching major strategic projects, and boosting investment in promising sectors. This helped to absorb and contain successive crises and enhance economic growth. 

Saudi Arabia's economic growth was the highest among the G20 countries in 2022 and 2023 thanks to the country's responsible fiscal policies, efficient spending, and solid financial sustainability vision, which have helped it avoid cyclical fluctuations. 

The forward-thinking structural reforms helped the Kingdom achieve a solid and comprehensive recovery. 

Reducing dependence on oil

The reforms helped create vital and diverse economic sectors and attractive investment opportunities, so Saudi Arabia could reduce its dependence on oil as a major source of income for the country and avoid being affected by the fluctuations in global oil prices.    

 

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An employee near a pipe carrying CO2 to the pipe line at the Hawiyah Natural Gas Liquids Recovery Plant, operated by Saudi Aramco.

 

Despite the current global economic conditions, and the tightening of monetary policies, Saudi Arabia will continue to boost government spending in 2023.

The Gulf country is, in fact, expected to spend $296 billion (1.11 trillion riyals), meaning its economy will continue to grow, as its commercial, industrial, and investment sectors expand. 

Saudi Arabia launched national programmes and strategies for investment in industry, transportation, logistics, mining, tourism, and sports as part of its recent efforts to boost its economy.

It also announced several mega dynamic projects, such as NEOM, The Line, New Square, Qiddiya, Red Sea, Amala, Central Jeddah, and other projects in many Saudi cities.

The economic, legislative, and structural reforms that Saudi Arabia has implemented demonstrate their feasibility and importance through the ability of the country's economy to overcome the challenges that have sent the global economy into shambles. 

While many economies are recording low growth rates, the Saudi economy achieved remarkable growth and success in 2022, surpassing all local and international estimates.

The economic reforms have also helped boost the credit ratings of the country, along with the major companies operating in it over the past two years. The ratings are vital in increasing an economy's value proposition and boosting investor confidence. 

Stock market opened to the world

Regarding the financial market, the inclusion of the Saudi stock market in many global indices has contributed to increasing the volume of foreign capital flowing into the Saudi stock market. 

 

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This picture taken December 12, 2019 shows a view of the sign showing the logo of Saudi Arabia's Stock Exchange Market (Tadawul) bourse in the capital Riyadh.

 

This greater contribution by global investors in companies listed on the Saudi exchange also increases foreign interest in developing these companies. 

The inclusion of the Saudi stock market in many global indices has contributed to increasing the volume of foreign capital flowing into the Saudi stock market. 

This greater contribution by global investors in companies listed on the Saudi exchange also increases foreign interest in developing these companies.

This, in turn, leads foreign investors to follow both the developments in the national economy and the qualitative shift in the Saudi economy itself collectively that increases the volume of investment in it.

The Saudi stock market has also seen the listing of major national companies with considerable global weight, as in the case of Saudi Aramco.

This came in addition to giant companies listing in sectors such as renewable energy, technology, and the financial sector. Together these listings have helped the Saudi financial market make the list of the 10 largest global financial markets by market capitalisation.

The Saudi economy is witnessing economic growth across many sectors. This is because the Kingdom has been able to take advantage of its natural resources and its strategic geographic location between three continents. 

This has granted the Kingdom a solid economic base that places it among the ranks of the world's 20 largest economies. It is now an active member of the G20 and a key player in the global economy and oil markets.

Its economic base is backed by a robust financial system, an effective banking sector, and large government companies staffed by highly qualified Saudis.

The Kingdom has undertaken structural, economic and financial reforms that have boosted economic growth while maintaining stability and financial sustainability. This is evident by how the business environment is improving. 

Economic diversification

The private sector is now supporting economic diversification and helping overcome obstacles to make the Kingdom a more attractive business environment. There is now more investment in previously untapped sectors, and the investment environment is more attractive to local and foreign investors.

To develop and diversify the economy and reduce its dependence on oil, the Kingdom launched Saudi Vision 2030. It aims to implement an array of economic and financial reforms to transform the structure of the Saudi economy, making it a more diverse and sustainable economy.

To develop and diversify the economy and reduce its dependence on oil, the Kingdom launched Saudi Vision 2030. It aims to implement an array of economic and financial reforms to transform the structure of the Saudi economy, making it a more diverse and sustainable economy.  

It envisions enhancing productivity, increasing the economic contribution of the private sector, and empowering the third sector.

 

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An aerial view of Jeddah city, placed on Red Sea Coast, is seen in Jeddah, Saudi Arabia on March 26, 2022.

 

Since the launch of this ambitious national vision, the Kingdom has successfully implemented many complementary initiatives and structural reforms that will enable its economic transformation. 

Promoting local products and industries, and nurturing promising economic sectors, maximising the role of the private sector and small and medium enterprises, making public finances more sustainable are some of the key pillars of this transformation.

These structural transformations have strengthened the Kingdom's ability to overcome global economic challenges and crises.

Meanwhile, the accelerating pace of structural transformation and sustainable economic growth is expected to continue in the coming years. 

This is especially true in light of several huge investment initiatives taking place under the auspices of the Public Investment Fund and as leading companies are expected to accelerate the localisation of both knowledge and innovative technologies.

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