\n\tRIYADH: Saudi Arabia is on course to sustain non-oil sector annual growth of 4.5 percent to 5.5 percent through the next five to 10 years as its Vision 2030 diversification program gathers pace, Moody\u2019s have forecast.\u00a0<\/p>\n
\n\tThe rating agency cited strong momentum from services, tourism, and a pipeline of mega events including the 2027 AFC Asian Cup, the 2030 World Expo, and the 2034 FIFA World Cup, all of which are expected to reinforce the Kingdom\u2019s non-oil expansion and attract sustained private investment.\u00a0\u00a0<\/p>\n
\n\tOther rating agencies and consultancies share a similar outlook. Fitch Ratings expects Saudi Arabia\u2019s non-oil growth to average around 4.5 percent through the medium term, while BMI and Strategic Gears forecast continued expansion in tourism and exports, reflecting broad confidence in the Kingdom\u2019s Vision 2030 diversification momentum.\u00a0<\/p>\n
\n\tThis comes on the back of Saudi Arabia\u2019s latest estimate, released on Sept. 30, in which the Ministry of Finance forecast real gross domestic product growth of 4.6 percent in 2026, supported by continued expansion in non-oil activities.\u00a0<\/p>\n
\n\tThe ministry\u2019s pre-budget statement set the 2025 projection at 4.4 percent, driven by a 5 percent increase in non-oil output, underpinned by robust domestic demand, rising employment, and expanding private-sector investment.\u00a0<\/p>\n
\n\tIn its latest report, Moody\u2019s stated: \u201cNon-oil economic growth, particularly in the services sector, will remain robust as the large-scale projects are implemented and gradually commercialize.\u201d\u00a0<\/p>\n
\n\tThe agency cautioned that progress on some flagship projects is uneven amid supply bottlenecks, engineering challenges and tighter funding conditions.\u00a0\u00a0<\/p>\n
\n\tMoody\u2019s expects authorities to keep diversification outlays relatively high even as oil prices soften, leading to \u201cmoderate fiscal deficits\u201d and a rise in government debt to more than 36 percent of GDP by 2030 from about 26 percent at end-2024.\u00a0<\/p>\n
\n\tIn a separate report on the banking system, Moody\u2019s said strong credit demand linked to Vision 2030 projects and mortgages has outpaced deposit growth, pushing the sector\u2019s loan-to-deposit ratio above 100 percent for the first time since 2021 and sustaining reliance on alternative funding.\u00a0\u00a0<\/p>\n
\n\t\u201cWhile domestic deposits are increasing, mainly supported by inflows from government entities and large companies, credit demand continues to grow at a faster pace,\u201d said the agency.<\/p>\n
\n\tIt noted that Saudi banks have diversified into capital-market issuance and syndicated loans; total bank issuance reached SR56 billion ($14.93 billion) in 2024, up from SR21 billion in 2023, with similar levels expected this year before easing as loan and deposit growth re-align.\u00a0<\/p>\n
\n\tThe report added that the Saudi Central Bank has moved to bolster resilience, introducing a 100-basis-point countercyclical capital buffer effective in 2026 and monitoring foreign-currency liquidity and stable-funding ratios \u2014 steps that could moderate loan growth at some institutions.\u00a0\u00a0<\/p>\n
\n\tMoody\u2019s also highlighted the role of the Saudi Real Estate Refinance Co. in easing liquidity pressures, with SRC\u2019s acquired portfolio rising to about 4 percent of the mortgage market and the launch of the Kingdom\u2019s first residential mortgage-backed security in August, initially for local investors.\u00a0\u00a0<\/p>\n
\n\tMarket funding brings its own risks, Moody\u2019s said, pointing to a near-doubling of foreign funding as a share of liabilities since 2020 and the banking system\u2019s net foreign-asset position turning negative in 2024.\u00a0\u00a0<\/p>\n
\n\tWhile the agency sees a loss of confidence as unlikely over the next 12 to 18 months, it warned that an abrupt shift could pressure renewals; measured diversification by tenor and geography would help mitigate that risk.\u00a0\u00a0<\/p>\n
\n\tAnother new report by Moody\u2019s on nonfinancial companies revealed that investment and reforms are lifting multiple non-oil sectors \u2014 hospitality and retail, manufacturing, mining and real estate among them \u2014 even as borrowing needs rise and credit outcomes diverge.\u00a0\u00a0<\/p>\n
\n\tMoody\u2019s estimates that cumulative private-sector investments of close to SR8 trillion will be needed by 2030 to sustain growth, with the Public Investment Fund remaining central to catalyzing co-investment.\u00a0\u00a0<\/p>\n
\n\tPIF\u2019s direct role is set to remain substantial. Moody\u2019s projects up to SR1 trillion of PIF investment by 2030 \u2014 on top of about SR642 billion over the past five years \u2014 while around SR7 trillion from other private participants will be required to maintain non-oil momentum.\u00a0\u00a0<\/p>\n
\n\tThe scale and complexity of projects such as Neom introduce execution risk, but phased investment and tighter oversight should support delivery.\u00a0\u00a0<\/p>\n
\n\tUtilities will carry some of the heaviest capital burdens as the energy mix targets a 50\/50 split between renewables and gas by 2030.\u00a0<\/p>\n
\n\tMoody\u2019s estimates at least SR750 billion of sector investment across 2019 to 2030, with the National Renewable Energy Program having launched roughly SR440 billion of projects since 2019. The Ministry of Energy plans to tender about 130 gigawatts of renewable capacity by 2030.\u00a0\u00a0<\/p>\n
\n\tAs of mid-2025, renewables accounted for around 9 GW \u2014 about 10 percent of total generation capacity.\u00a0\u00a0<\/p>\n
\n\tSaudi Electricity Co., the sole transmitter and distributor, is accelerating grid expansion and interconnections and expects its regulated asset base to grow with elevated capital spending \u2014 rising from an average SR29.4 billion per year since 2019 to about SR50 billion to SR55 billion annually in 2025-30.\u00a0\u00a0<\/p>\n
\n\tHigher investment needs will strain free cash flow and liquidity, though a supportive regulatory framework and increased indirect subsidies \u2014 SR10.8 billion in 2024, or 12 percent of revenue \u2014 provide offsets.\u00a0\u00a0<\/p>\n
\n\tAcross capital markets, Moody\u2019s expects more Saudi corporates to tap equity and debt as regulatory upgrades broaden participation, with national champions and private companies aiming to balance expansion with prudent leverage.\u00a0\u00a0<\/p>\n
\n\tThat trend, it said, should gradually deepen the domestic market, diversify funding sources and support a more resilient financing ecosystem.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"
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