RIYADH: After eight years of budget deficits, Saudi Arabia reported a SR90 billion ($24 billion) projected surplus for 2022, estimating a 7.4 percent gross domestic product growth according to a Cabinet statement — an opportunity that sets the stage for stock market improvement.
“The current budget shows strong macro indicators that will enhance the confidence in economic growth and continuous reforms that are necessary to make the stock market more attractive to all investors to maintain positions,” Mazen Alsudairi, head of research at Al Rajhi Capital told Arab News.
"The economy growth next year is supported with 4 percent growth in non-oil activities and that's also another driver for strong stock market performance, in addition to an expected increase in liquidity," he added.
The Kingdom’s budget picture for next year could have a big impact on investor sentiment amid uncertainty, potentially leading to a rally momentum for the Saudi bourse.
Tadawul’s main and parallel indexes, TASI and Nomu, extended their gains in the post-budget trading session, up 0.74 percent and 1.08 percent respectively in midday trading.
Elevated investor appetite led to stronger bourse performance in the Kingdom, outperforming other Mideast stocks. The UAE’s main index DFM was up slightly by 0.25 percent, Abu Dhabi’s index ADX lost 0.23 percent, and the Qatari index QSI went down by 0.07 percent.
Actual 2021 budget figures could also drive a healthier stock market. The stock market saw a recovery this year with many companies turning into profit after a slump in revenues and profitability in 2020.
Some 26 enlisted companies in the Saudi stock exchange rebounded from a nine-month 2020 net loss to profit this year. With improved companies’ performance, TASI soared 26.89 percent and Nomu rose 18.48 percent in the one-year period ending Dec.13.
For the current fiscal year, the Kingdom’s economy narrowed the budget deficit to SR85 billion from the initial estimate of SR145 billion made last year, thanks to the recovery of markets wounded by the wave of diminished economic growth and wrecked supply chains caused by the coronavirus pandemic.
Revenues are set to stand at SR930 billion in 2021, in contrast to the estimated revenues of SR846 billion projected last year. The revenue boost was attributed to gains in Saudi’s non-oil sector which saw a revenue increase from SR332 billion in 2019 to SR372 billion in 2021, which likewise bodes well for non-oil stocks in the coming period.
The overall positive performance indicated an uptrend in the economy and potentially better financial results in the near term, hence improving investors’ level of confidence in the market.