Exceptionally good week points to strong Saudi economy ahead

The Kingdom’s carbons are still performing and surprising, while its huge investment portfolio is top of the table. With such an ambitious economic transformation to pay for, this is just as well.

Exceptionally good week points to strong Saudi economy ahead

It was a good week for the Saudi economy. There were big new oil and gas discoveries, contracts were awarded for Phase II of the Jafurah unconventional gas field project and Phase III of the Saudi gas network expansion, and Saudi Aramco launched a secondary share offering, hoping to raise $13bn.

There was more good news from the Kingdom’s sovereign wealth fund (SWF)—called the Public Investment Fund (PIF)—when it reported its profits. These showed that it was performing strongly, particularly when compared to peers.

Since 2015, when there was a restructuring, the PIF has increased its asset size fivefold. It now manages assets worth around $925bn, including almost 100 companies that it has established, operating in more than a dozen industries.

Growing in strength

PIF’s annual revenues have doubled from $44bn to $88bn, while net profits reached $17bn—a far cry from its $4.5bn loss in 2022. Its brand is now valued at $1.1bn, according to Brand Finance, nearly twice that of the Abu Dhabi Investment Authority (ADIA).

Another highlight is the 92% PIF scored on governance, sustainability, and resilience, according to Global SWF, a fund analyst. This is a huge improvement on the 60% it scored in 2022. ADIA, meanwhile, scored 56%.

Unlike other leading sovereign wealth funds, such as those from Qatar or Singapore, PIF invests huge sums at home, not least to help the country meet its Vision 2030 commitments. The Kingdom is seeking to attract the best global talent with an innovative investment strategy and access to new sectors, aligning with the objectives of Vision 2030. This includes enhanced roles for young people and women in various sectors.

Unlike other leading sovereign wealth funds, PIF invests huge sums at home, not least to help the country meet its Vision 2030.

Given that much of the global economy is facing challenges, PIF's highest credit rating and its ambition to double the value of its managed assets to $2tn by 2030 is to be commended. Attracted in part by the confidence and stability of its sovereign fund and the ambition of Vision 2030, companies around the world are starting to relocate their headquarters to the Kingdom, especially suppliers working to localise supply chains.

Funding the future

Saudi Arabia's central role in global oil markets endows Riyadh with both wealth and clout. It is also a primary source of funding for Vision 2030, which will cost hundreds of billions of dollars to complete. The city of NEOM alone could cost $500bn.

The Saudi vision is to diversify the economy away from oil and gas, using large infrastructure projects to develop sectors such as tourism and technology. Crucially, this will also enable political, social, and economic development and meet the needs of the electricity, water, mining, petrochemicals, and semiconductor industries.

With such ambitious and costly goals, new oil and gas discoveries become more important. New projects, along with the significant increase in the Kingdom's reserves, strengthen Saudi Arabia's position in the natural gas industry.

Saudi Energy Minister Prince Abdulaziz bin Salman said in recent days that the Kingdom's gas production will grow 63% by 2030, reaching 21.3 billion cubic feet (up from 13.5 billion). Gas demand is expected to increase significantly by 2040.

All of this shows that Saudi Arabia remains central to the Middle Eastern model, whether politically, economically, or financially, as it paves the way in areas like green energy transition.

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