Riyad Capital expects revived Saudi economy in 2024-2025

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The Saudi economy is likely to witness a recovery in 2024 and 2025, with continued strong growth in the non-oil sector, Riyad Capital expected in the Q2 2024 Saudi Economy Chartbook report.

The recovery will be driven by a growth-oriented fiscal policy and a focus on increasing investment expenditure to stimulate growth in the coming years.

According to the report, the non-oil sector is seen to grow by 4.8% in 2024 and 5.2% in 2025.

Its expectations indicated that oil production will expand again to exceed 10 million barrels per day during the next 18 months. Most of this pick-up is poised to take place in 2025.

Although the oil sector’s contribution to the GDP will remain slightly negative in 2024 at a rate of -2.2%, it will achieve significant growth of 8.7% in 2025, the report highlighted.

As a result, the research house projected the overall economy to grow by 2.3% in 2024, with the pace further accelerating to 5.8% in 2025.

Given the expansionary fiscal policy expected to be followed by the government in the next two years, Riyad Capital anticipated the Saudi fiscal deficit to reach 3% of GDP in 2024, before shrinking to 1.8% of GDP in 2025.

The brokerage expects the US Federal Reserve to lower interest rates twice in the second half of 2024, followed by four more cuts in 2025.

Accordingly, the Saudi Central Bank (SAMA) is likely to reduce the official repo rate and the reverse repo rate by 150 basis points by the end of 2025.