Saudi economic growth forecast: Moody’s projects sharp rise driven by diversification and giga-project investments

Saudi Arabia’s economy is set for remarkable growth, with Moody’s Saudi economic growth forecast predicting a strong 4.7% expansion by 2025. This projection is driven by the Kingdom’s Vision 2030, a transformative plan to diversify its economy beyond oil and position itself as a global hub for innovation, sustainability, and tourism.

Moody’s projection surpasses earlier estimates, including the Saudi government’s own forecast of 4.6%. The report also anticipates a modest 1.7% growth in 2024, reflecting short-term challenges but steady groundwork for a long-term economic boom.

Key to this growth is the Kingdom’s focus on government-led initiatives backed by its Public Investment Fund (PIF). These include high-profile “giga-projects” such as the futuristic NEOM city, the Red Sea development, and Qiddiya, a mega-entertainment complex. These projects aim to drive growth across technology, infrastructure, tourism, and renewable energy sectors, reducing dependence on hydrocarbon revenues.

According to Moody’s, these initiatives not only fuel domestic demand but also position Saudi Arabia as a leader in sustainable development and innovation. Vittoria Zoli, an analyst at Moody’s, noted that the Kingdom’s strategy to diversify is crucial for long-term economic stability, supporting the Saudi economic growth forecast in a shifting global market.

Steady Inflation Signals Resilience

While many global economies struggle with inflationary pressures, Saudi Arabia has maintained a commendable level of price stability. Moody’s expects inflation to remain low, at 1.6% in 2024, rising slightly to 1.9% in 2025. This reflects the government’s adept handling of monetary policy amidst global economic volatility.

The Kingdom’s inflation rate currently ranks among the lowest in the Middle East. October figures from Saudi Arabia’s General Authority for Statistics recorded a 1.9% year-on-year increase, well within manageable limits.

A Regional Powerhouse

In the broader Middle East, Saudi Arabia’s efforts mirror those of its Gulf neighbours. The UAE, for example, is also striving to expand its economy, with Moody’s projecting 4.8% growth in 2025. However, inflation in the UAE is expected to be slightly higher than in Saudi Arabia.

Meanwhile, Egypt faces contrasting challenges. Despite an anticipated economic rebound to 4% growth in 2025, the country continues to grapple with double-digit inflation rates, underscoring the varied economic landscapes within the region.

Global Context: Emerging Market Growth

Moody’s latest analysis paints a mixed picture for emerging markets. While global inflationary pressures are easing, economic growth rates vary widely. India, buoyed by strong domestic demand and supply chain reconfiguration, is forecast to grow by 6.6% in 2025. In contrast, China’s economic growth is expected to moderate, dropping to 4.2% in 2025 as its economy matures.

The report highlights a broader stabilisation in emerging markets, driven by declining inflation and improving credit conditions. However, risks persist, including potential shifts in US trade policy that could disrupt global supply chains and affect commodity prices.

“Emerging markets face a delicate balance,” said Zoli. “While growth prospects remain encouraging, external factors such as geopolitical tensions and high debt levels pose significant challenges.”

The Vision 2030 Advantage

Saudi Arabia’s Vision 2030 has positioned the Kingdom to weather global uncertainties more effectively. The strategy’s emphasis on sustainability and innovation has not only enhanced economic resilience but also attracted foreign investment.

With a planned expenditure of $343 billion in 2025, the government is doubling down on its commitment to these transformative projects. The futuristic NEOM city, for instance, is poised to become a symbol of what the Kingdom aims to achieve: a thriving, diversified economy that leads on the global stage.

Challenges Ahead

Despite the optimistic outlook, Moody’s cautioned about persistent credit risks. Tight credit spreads and high bond issuance costs remain hurdles for emerging markets, including Saudi Arabia. The report also noted the potential impact of fluctuating oil prices, which, while less critical than in the past, still play a role in the Kingdom’s financial health.

However, Saudi Arabia’s leadership remains focused on creating a robust and adaptable economic framework. By investing in key sectors and maintaining fiscal discipline, the Kingdom is well-positioned to achieve its ambitious goals.