Saudi economy shines amid low inflation rates and Vision 2030 success: official report

Saudi economy shines amid low inflation rates and Vision 2030 success: official report
The analysis delved into global economic growth trends and their potential implications for the Kingdom. Shutterstock
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Updated 29 May 2024
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Saudi economy shines amid low inflation rates and Vision 2030 success: official report

Saudi economy shines amid low inflation rates and Vision 2030 success: official report

RIYADH: The Saudi economy has demonstrated resilience, marked by sustained growth in non-oil sectors and a globally low annual inflation rate of 1.6 percent, as per an official report. 

This was highlighted during the latest meeting of the Council of Economic and Development Affairs, where discussions covered crucial reports and topics. 

Among these was the Ministry of Economy and Planning’s quarterly analysis of international and local economic performance in the first quarter of 2024. The analysis delved into global economic growth trends and their potential implications for the Kingdom. 

Meanwhile, the council, also known as CEDA, reviewed the Strategic Management Office’s 2023 report on the achievements of targets set by the Kingdom’s Vision 2030, highlighting the significant progress made. By 2023, 87 percent of Vision 2030 initiatives were either completed or on track, surpassing the performance of 2022. 

Additionally, the Ministry of Health presented progress updates on two pivotal initiatives: the establishment of the Health Holding Co. and the Center for National Health Insurance. These initiatives are integral to the ministry’s healthcare transformation plan, the Saudi Press Agency reported. 

The presentation outlined the health ministry’s strategic ambitions, including goals, essential implementation stages, and the embrace of a contemporary healthcare paradigm.  

This innovative approach has widened access to healthcare services, improved their caliber and efficacy, and strengthened preventive measures against medical hazards. 

Moreover, the presentation highlighted the successful completion of the inaugural phase of the strategy, with 20 health clusters established across Saudi Arabia by the end of 2023. 

The SMO’s report also highlighted notable accomplishments, program evaluations, and an overall performance summary, along with ongoing efforts and future aspirations for 2024.  

The analysis emphasized the ongoing transformation efforts driven by the vision, which have demonstrably achieved and even surpassed the 2023 goals concerning the vision’s three aspects: a vibrant society, a thriving economy, and an ambitious nation. 

CEDA issued pertinent decisions and recommendations concerning all the topics addressed during the meeting.  

Under the Council of Ministers, CEDA aims to establish the governance, mechanisms, and measures necessary to achieve Saudi Vision 2030, addressing issues spanning all domestic matters, from health to labor to education and Islamic affairs.


Saudi Arabia’s international reserves highest in 18 months at $467.5bn

Saudi Arabia’s international reserves highest in 18 months at $467.5bn
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Saudi Arabia’s international reserves highest in 18 months at $467.5bn

Saudi Arabia’s international reserves highest in 18 months at $467.5bn

RIYADH: Saudi Arabia’s international reserve assets reached SR1.75 trillion ($467.5 billion) in May, the highest in 18 months and an annual 6 percent increase, according to new data. 

Figures released by the Saudi Central Bank, also known as SAMA, reveal that these holdings encompass monetary gold, special drawing rights, the International Monetary Fund’s reserve position, and foreign reserves.

According to May’s figures, international currency holdings – including currency and deposits abroad and investments in foreign securities – constituted 95 percent of the total, amounting to SR1.66 trillion.

This category also registered a 6 percent increase during this period.

SDRs comprised 4 percent of the total, amounting to SR77.68 billion, and increased by 0.3 percent during this period. 

Created by the IMF to supplement member countries’ official reserves, SDRs derive their value from a basket of major currencies: the US dollar, euro and Chinese yuan as well as the Japanese yen, and British pound. They can be exchanged among governments for freely usable currencies when needed. 

SDRs provide additional liquidity, stabilize exchange rates, act as a unit of account, and facilitate international trade and financial stability. 

The IMF reserve position totaled SR12.72 billion, however decreased by 14 percent during this period. This category essentially represents the amount a country can draw from the IMF without conditions.

Fitch Ratings announced in March that it had affirmed Saudi Arabia’s long-term foreign-currency issuer default rating at “A+” with a stable outlook.

The agency highlighted that the Kingdom’s position reflects its robust fiscal and external balance sheets. It also noted improvements in governance driven by social and economic reforms, as well as efforts to enhance government institution effectiveness.

Saudi Arabia’s ratings are bolstered by its strong fiscal and external balance sheets, with government debt to gross domestic product and sovereign net foreign assets significantly stronger than the “A” and “AA” medians and substantial fiscal buffers in the form of deposits and other public-sector assets.

According to the agency, the Kingdom benefits from considerable fiscal buffers and boasts one of the highest reserve coverage ratios among rated sovereigns, at 16.5 months of current external payments. 

Fitch anticipates reserves to decrease to an average of $420 billion by 2024 to 2025 due to a narrowing current account surplus offset by investments from entities like the Public Investment Fund.

Sovereign net foreign assets are also projected to remain above 50 percent of GDP during this period, surpassing the “A” median of 6 percent.

The IMF praised Saudi Arabia’s “unprecedented economic transformation” in a June report, attributing its success to prudent government policies and effective diversification efforts.

It also highlighted strong domestic demand, ongoing financial reforms, and environmental policies as key strengths in the Kingdom’s evolving economic landscape. 

Following its official visit to the country, the IMF projected Saudi Arabia’s GDP growth to accelerate to approximately 4.5 percent by 2025, stabilizing at 3.5 percent annually over the medium term.

Non-oil growth is expected to reach 3.5 percent in 2024 before further increasing from 2025 onwards. Despite a projected decline in oil output in 2024 due to production cuts, there is anticipation for a recovery in 2025.

The IMF emphasized that Saudi Arabia’s diversification efforts are yielding positive results, stressing the need to sustain non-oil growth momentum, ensure financial stability, and enhance business competitiveness.


UAE stock market cap surges by $5.79bn in 2024 with strong IPO activity

UAE stock market cap surges by $5.79bn in 2024 with strong IPO activity
Updated 21 min 12 sec ago
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UAE stock market cap surges by $5.79bn in 2024 with strong IPO activity

UAE stock market cap surges by $5.79bn in 2024 with strong IPO activity

RIYADH: The UAE’s stock market capitalization has surged by 21.3 billion dirhams ($5.79 billion) this year, thanks to three new initial public offerings launched since the beginning of 2024, according to a new analysis.

Alef Education Holding, Parkin, and Spinneys 1961 Holding, were the firms to float on the market, and the moves significantly boosted liquidity, increased investment attractiveness, and reinforced the UAE’s position as a premier financial and business hub globally, according to the Emirates News Agency.

Alef Education Holding’s IPO, the first on the Abu Dhabi Securities Exchange in 2024, led the way with a market capitalization of around 9.45 billion dirhams. The company raised 1.89 billion dirhams by selling 1.4 billion shares, representing 20 percent of its total shares, at 1.35 dirhams per share. 

The IPO saw strong demand, surpassing the target subscription value by 39 times, even after the individual investor allocation was increased from 8 percent to 10 percent.

As of the trading session on May 20, the total market capitalization of listed stocks reached 3.48 trillion dirhams, with 2.79 trillion dirhams on the Abu Dhabi Securities Exchange and 688.7 billion dirhams on the Dubai Financial Market. 

This comes as the market value of listed stocks in the UAE grew by over 444.5 billion dirhams throughout 2023, pushing the total market capitalization to 3.651 trillion dirhams by year-end. 

Additionally, this influx of capital aligns with the UAE market’s strategic plan to double its value to approximately 6 trillion dirhams in the coming years. 


MENA IT spending to reach $194bn in 2024 – up 5.2% on previous year: report

MENA IT spending to reach $194bn in 2024 – up 5.2% on previous year: report
Updated 18 June 2024
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MENA IT spending to reach $194bn in 2024 – up 5.2% on previous year: report

MENA IT spending to reach $194bn in 2024 – up 5.2% on previous year: report

RIYADH: Information technology spending in the Middle East and North Africa region is set to reach $193.7 billion in 2024, a 5.2 percent increase from the previous 12 months, according to a new report. 

In its latest MENA IT Spending forecast, US-based consulting firm Gartner stated that while the outlay in the sector is set to increase, it will be at a slower rate than the 6.6 percent annual rise recorded in 2023.

This comes as tech startups based in the region secured $429 million in funding in the first quarter of the year. Additionally, MENA saw around $1 billion in tech commitments by venture capitals during the first six months of 2024.

Earlier this year, global investment manager Investcorp dedicated $500 million for growth stage tech companies in the region, while venture capital firms Singaporean Golden Gate and UAE’s Polynome Group both dedicated $100 million each for MENA-based tech investments.

Miriam Burt, managing vice president analyst at Gartner, noted that the slowing growth of expenditure in the IT sector is being caused by factors beyond the sector itself.

“While inflation in the region has eased, organizations in the Middle East continue to face challenges due to ongoing uncertainty caused by oil production cuts, downside economic risks linked to regional geopolitical tensions, as well as supply chain disruptions in key shipping routes,” she said.

“As a result, local organizations are becoming more cautious with their IT expenditures,” Burt added. 

Data center spend to fall

Data centers have been the focus of spending in recent years. Shutterstock

The report stated that despite experiencing growth in 2023, spending on data center systems is projected to decline by 0.3 percent in 2024, reflecting a shift toward alternative capabilities. 

Data center system expenditures are set to drop from $4.82 billion in 2023 to $4.80 billion in 2024. 

The systems in data centers include servers, external controller-based storage, and enterprise network equipment. 

“This is due to the rise in demand of alternative options such as software-defined storage, hyper-converged infrastructure software, and the ‘storage as a service’ model,” said Burt. 

MENA IT services spending is expected to record an increase of 9.6 percent in 2024 to reach $19 billion, up from $17.3 billion last year. 

“IT leaders in the MENA region are, in the first instance, spending more on professional and consulting services to prepare their businesses for cloud migration, AI (artificial intelligence), generative AI, and IoT (internet of things) implementations, and secondly, taking advantage of the data monetization opportunities resulting from the convergence of these technologies,” Burt added. 

“Security remains a key area for IT services spending, as well as the increasing purchase of products, services, and tools through ‘XaaS’ (Anything-as-a-Service) consumption models – both contributing to the overall growth of this segment,” she added. 

Demand drop of new devices

Shutterstock

Device spending is expected to decline by 4.5 percent in 2024 due to uneven demand for newer devices, such as mobile phones, in different countries within the MENA region. 

The subsector is set to drop from $28.3 billion recorded in 2023 to $27 billion this year. 

Software is set to see the highest growth in 2024, with spending forecasted at $15.2 billion, up from $13.5 billion in the previous 12 months. 

Communications services are expected to account for the bulk of 2024’s IT spending, with $127.5 billion in expenditures, up from $120 billion in 2023. 

“CIOs (chief information officers) in the MENA region are expected to increase their spending on cloud services. While AI/GenAI has some influence on cloud services spending, it is not expected to have an immediate and significant impact on IT spending levels in MENA in 2024,” said Eyad Tachwali, senior director advisory at Gartner. 

“Regional CIOs’ focus today is primarily on everyday lower-cost use cases rather than on costly game-changing AI,” he added. 

Furthermore, the report stated that global hyperscalers, which have the ability to offer extensive infrastructure for storage and computing facilities for AI and GenAI, are accelerating investments in in-country data centers, particularly world-class green data centers. 

“Some have launched sovereign cloud services tailored to the unique needs of specific Gulf Cooperation Council markets,” Burt said. 

Gartner’s IT spending forecast methodology relies heavily on rigorous sales analysis by over a thousand vendors across the entire range of IT products and services. 

On a separate note, other analysts state that Saudi Arabia is the fastest-growing IT market in the Middle East, Turkiye, and Africa. 

Jyoti Lalchandani, regional managing director of research firm IDC, said wider information and communication technology market spending is expected to reach $37.5 billion by the end of 2024. 

The comments were made during the ICT Indicators Forum hosted by the Saudi Ministry of Communication and Information Technology alongside the Saudi Communications, Space, and Technology Commission in Riyadh on April 24.  

It was further noted that spending in this area across the Saudi government sector would exceed $752 million by the end of 2024 as innovative technologies become foundational to building an “experience economy.” 

“AI, big data analytics, IoT, and cybersecurity spending is poised for tremendous growth and will account for almost one-third of overall IT spending in Saudi Arabia in 2024. Spending on AI in Saudi Arabia will surpass $720 million in 2024, reaching $1.9 billion by 2027 at a CAGR (compound annual growth rate) of 40 percent – half of that will be on interpretative AI,” Lalchandani said. 

“We have seen Saudi Arabia emerge as a hub for the cloud,” he added, with spending on public cloud forecasted to surpass $2.4 billion in 2024 and reach $4.7 billion by 2027.  

Software-as-a-Service will account for more than 50 percent of the 2024 spending. 

IDC further highlighted that spending on cybersecurity alone will surpass the $1 billion mark in 2024 and reach $1.6 billion in 2027. 

“I do remember a few years ago, the cybersecurity market was estimated at about $500 million. Today, we’re talking about literally double that. We’re talking about $1 billion in the cybersecurity industry, and to hear it be called the fastest growing market in the region is really a testament to our beloved nation,” Salman Faqeeh, CEO of Cisco Saudi Arabia, said while speaking on a panel during the forum. 


Malaysia preparing to join BRICS economic group, media report says

Malaysia preparing to join BRICS economic group, media report says
Updated 18 June 2024
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Malaysia preparing to join BRICS economic group, media report says

Malaysia preparing to join BRICS economic group, media report says

KUALA LUMPUR: Malaysia is preparing to join the BRICS group of emerging economies, Prime Minister Anwar Ibrahim said in an interview with Chinese media outlet Guancha, Reuters reported.

The BRICS group of nations originally included Brazil, Russia, India, China, and South Africa, which gave it the acronym.

The group last year began to expand its membership as it looks to challenge a world order dominated by Western economies, with Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and the UAE joining and more than 40 countries expressing interest.

“We have made a decision, we will be placing the formal procedures soon ... we are just waiting for the final results from the government in South Africa,” Anwar said, according to a video of the interview posted by Guancha on Sunday.

A representative from Anwar’s office on Tuesday confirmed his comments to Reuters.

During the interview, he did not provide further details on the application process.

Anwar’s comments came ahead of a three-day visit by Chinese Premier Li Qiang this week, as part of celebrations marking the 50th year of diplomatic relations between Malaysia and China.

Malaysia and China are expected to sign several deals during Li’s visit, including renewing a five-year trade and economic cooperation agreement.


Oil Updates – crude edges down amid cautious demand outlook

Oil Updates – crude edges down amid cautious demand outlook
Updated 18 June 2024
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Oil Updates – crude edges down amid cautious demand outlook

Oil Updates – crude edges down amid cautious demand outlook

SINGAPORE/HOUSTON: Oil prices edged down in Asian trade on Tuesday, after posting gains in the previous session, as markets remained cautious about global demand growth prospects amid expectations of stronger supplies, according to Reuters.

Global benchmark Brent crude futures slipped 12 cents, or 0.14 percent, to $84.13 per barrel at 9:15 a.m. Saudi time. US West Texas Intermediate crude futures fell 14 cents, or 0.17 percent, to $80.19 a barrel.

Both benchmarks gained around 2 percent on Monday, closing at their highest since April.

“The oil market shifted its focus back to fundamentals, which have been soft for some time,” said BoFA commodity and derivatives strategist Francisco Blanch in a client note, adding that global crude oil inventories and refined product storage in the US and Singapore, among other places, was higher.

Meanwhile, global oil demand growth decelerated to 890,000 barrels per day year-on-year in the first quarter, and data suggests consumption growth likely slowed further in the second quarter, he said in the note.

China’s oil refinery output slipped 1.8 percent from year-ago levels in May, statistics bureau data showed on Monday, as refiners undertook planned maintenance overhauls and processing margins were pressured by rising crude costs.

Markets were also looking out for further clues on interest rates, and how the US demand situation would pan out, as several US Federal Reserve representatives will be speaking later on Tuesday.

Some analysts remained bullish on the price impact of an extension by the OPEC+ group of supply cuts in the near-term.

“The latest guidance provided by OPEC+, as well as their unchanged 2.25 million barrels per day demand growth outlook, signals a stagnation in oil supply growth for 2024 and an apparent downside risk to production in 2025,” said Patricio Valdivieso, Rystad Energy vice president and global lead of crude trading analysis.

“Under these conditions — and the disconnect between the OPEC+ demand outlook and all other agencies — it is hard to remain fully bearish when global oil supply growth appears decimated,” he added.

Recent rebounds in complex refining margins, particularly in Europe and Asia, were also supportive to markets, said Sparta Commodities analyst Neil Crosby.

Refining margins at a typical complex refinery in Singapore averaged at $3.60 a barrel for June so far, compared with $2.66 a barrel in May.