Davos 2022 lauds Saudi economy, but Kingdom must push ahead with reforms
Despite the tough two years that the global economy has gone through — due to the COVID-19 pandemic, the Russia-Ukraine conflict and unprecedented inflation rate hikes — the Saudi Arabian economy has stood firm.
The Saudi delegation that attended this year’s Davos World Economic Forum (WEF), from May 22 to 26, explained in a number of panel discussions, the reasons behind the strength of the national economy and how it managed to successfully navigate such a difficult path.
Saudi’s gross domestic product grew by 9.6 percent in the first quarter of this year, growth not seen since 2011. This was driven by the oil sector which jumped by 20.4 percent, the non-oil sector which rose by 3.7 percent and the government sector, which was 2.4 percent higher.
There was also significant growth among such sectors as digital technology and tourism in the period.
The holiday sector saw the number of tourists coming to the country rise from 41 million tourists in 2019 to 63 million in 2021. The rapid issuance of tourist visas and the request for licenses from businesses related to tourism helped the sector to grow robustly. This lifted the Kingdom 10 places higher in the World Economic Forum’s Travel and Tourism Development Index 2021, to 33rd.
It is worth noting that in 2019, Saudi Arabia launched its National Tourism Strategy, which presented a clear plan to drive forward the aims of the Kingdom’s Vision 2030 program of social and economic reforms. This plans to boost the contribution of the tourism sector to 10 percent of GDP, create one million new jobs, and attract 100 million local and international visits a year by 2030.
Saudi female empowerment in technology has also improved, with the participation of women in the industry rising to 29 percent in 2021 from seven percent in 2016, beating the G20 and EU average of 27 percent.
Last but not least, foreign direct investment, a key catalyst for investment in technology and attracting know-how, has shown significant improvement. It has lifted from less than 1 percent of GDP in 2016 to 2.3 percent in 2021, with total investments hitting $20 billion.
WEF President Børge Brende praised the socioeconomic reforms taking place in the Kingdom. He said: “You see women driving and when you come to hotels or restaurants, you see women being a natural part of society”. Among other momentous changes underway in Saudi Arabia, Brende described investments in diversifying the economy, new technology, and education and skills, as noteworthy.
However, despite these improvements, he believed that Saudi Arabia needs to produce goods and services that rank higher up the value chain in the years to come, and use more technology on its production lines. Also, there are areas where the Kingdom can still improve its tax system and red tape, the WEF head said.
Based on the view that Saudi Arabia is rising because other countries in the Gulf are faltering, Faisal Abbas, the editor-in-chief of Arab News, raised an important question at one of the WEF’s panels where the Saudi delegation took part. Abbas asked whether the progress happening in the Kingdom would accelerate regional growth, or did it come at the expense of other countries in the region?
The panel confirmed that the progress happening across Saudi Arabia is in the interest of the region as a whole, since it will boost competitiveness across the Gulf. However, it requires integration, coordination and collaboration, which they said is happening.
Despite the severe disruption across the global economy, many forecasters believe the Saudi economy will manage to emerge as an economic powerhouse with GDP expected to top $1 trillion this year and rank as the 15th biggest economy in the world by 2030.
But such ambitious targets will not be achieved without facing a number of challenges, such as maintaining fiscal sustainability in the medium and long-term, as well as dealing with unexpected global economic shocks. Saudi Arabia must also continue to implement its economic and structural reforms to boost its competitiveness.
• Talat Zaki Hafiz is an economist and financial analyst. Twitter: @TalatHafiz