Riyad Capital expects Saudi economy to ‘rebound’ in 2024

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Riyad Capital said, in its Saudi Economic Chartbook for Q4 2023, that the Saudi economy is forecast to “consolidate in 2023, but to rebound in 2024.”

It also projects “continued solid growth” for non-oil activities, thanks to a growth-oriented fiscal policy that focuses on increased investment spending — which will also stimulate growth in 2024.

According to Riyad Capital, Saudi non-oil activities are estimated to grow by 5.1% and 4.9% in 2023 and 2024, respectively.

“In 2022, the oil sector recorded a peak growth contribution last seen in 2003. By contrast, this year the oil sector is expected to contract as a result of the crude oil output cuts implemented in the course of the last 12 months. This will lead to a projected growth rate of the oil sector of –7.5% in 2023,” read the report.

This downtrend in crude output in 2023 is poised to gradually reverse through 2024, the brokerage added.

Riyad Capital also expects the Kingdom’s macroeconomic growth to stabilize in 2023 and the year after. Meanwhile, GDP growth is likely to rally to 4.1% in 2024.

“In our baseline scenario, we expect global oil prices to stay at elevated levels in 2024. For Brent oil, we forecast an average price of $89 in 2024 after $83 in 2023,” the brokerage wrote.

It further stated, “For 2023, the fiscal deficit is estimated at SAR 82 billion which corresponds to 2.1% of GDP. For 2024, we forecast this deficit to narrow to SAR 43 billion or 1.1% of GDP, primarily due to gradually higher oil revenues and notably higher non-oil revenues.”

Riyad Capital forecasts the Saudi inflation “to generally remain tame,” continuing to decline to 2.2% in 2024.

Elsewhere, the brokerage anticipates the US Federal Reserve to cut rates by overall 100 basis points (bps) during 2024. The Saudi Central Bank (SAMA) is projected to follow suit and slash its official repo and reverse repo rates each by 100 bps next year.