Saudi Arabia’s cosmic aspirations fueling economic prosperity beyond earth

Saudi Arabia’s cosmic aspirations fueling economic prosperity beyond earth
Strategic partnerships with leading space agencies and organizations propel the Kingdom’s space aspirations to new heights. (Shutterstock)
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Updated 10 June 2024
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Saudi Arabia’s cosmic aspirations fueling economic prosperity beyond earth

Saudi Arabia’s cosmic aspirations fueling economic prosperity beyond earth
  • Vision 2030 envisions the Kingdom as a formidable player in space exploration and technology

RIYADH: Space exploration has transitioned from being solely government-driven to becoming an essential element of our everyday lives, significantly enhancing our quality of life. 

Saudi Arabia is charting a course toward the stars, propelled by an audacious vision that extends far beyond terrestrial boundaries. Vision 2030 envisions the Kingdom as a formidable player in the global arena of space exploration and technology. 

In an interview with Arab News, Amar Vora, head of space at Serco Middle East, noted that the genesis of Saudi Arabia’s cosmic aspirations can be traced back to 1985, with the historic journey of Saudi Prince Sultan bin Salman Al-Saud and the launch of Arabsat-1A. 

“Let’s not forget the impressive achievements of the King Abdulaziz City for Science and Technology, which has been helping to shape the national vision in space, building up knowledge, capacity, and infrastructure for over 20 years,” he said. 

Vora highlighted the 17 satellites launched by KACST since 2000, along with the Saudi Space Agency’s formation from the Saudi Space Commission.  

He added: “Space endeavors are no longer an exclusive playground for government; it is increasingly becoming a key component of our day-to-day lives, positively impacting our quality of life.”

Pioneering achievements 

Saudi Arabia’s journey into space began decades ago, and since then, the Kingdom has achieved remarkable milestones. 

Notably, the landmark partnership with Axiom Space marked a significant milestone, as astronauts Rayyanah Barnawi and Ali Al-Qarni embarked on the Ax-2 mission to the International Space Station in 2023.  

Barnawi became the first Saudi woman to journey into space, symbolizing Saudi Arabia’s commitment to gender equality and inclusivity in the realm of space exploration. 

Commenting on this endeavor, Vora said: “Of course, the Ax-2 mission provided the space community with a flavor of what’s to come from KSA’s space ambitions, becoming one of only a few countries to have achieved human spaceflight, and that in record time since the Saudi space decree was ratified!” 

He went on saying that partnerships with companies like Axiom Space “that are transforming and democratizing access to human spaceflight, highlight the ability of CST and SSA to capitalize on innovative solutions and services in the market.” 

Vora commended Barnawi’s efforts and said that this “is what we should come to expect from the Saudi and the global space sector. This is a sector that provides equitable representation and inspires and encourages engagement from people of all backgrounds and genders.”

Saudi Space Agency 

The Saudi Space Agency oversees the formulation and execution of the National Space Strategy, aimed at positioning the Kingdom as a leading spacefaring nation. 

Vora explained: “In doing so, SSA will be required to develop national capabilities in space, across the space value chain, from upstream (satellite systems and technologies), midstream (ground systems and operations), to downstream (data management and value-added services). The agency will also be responsible for promoting the uptake of space data across government and industries.” 

According to the top official, these advancements necessitate industry support for design, delivery, and operation, giving the agency a mandate to foster private sector expansion. 

This entails partnerships and investments with companies of varying sizes and backgrounds, both domestic and international, facilitated by the establishment of the National Space Co. 

“In implementing the strategic vision, SSA also has a key role to collaborate with international partners, leveraging international and long-standing experience and capabilities, with mutual interests in achieving scientific excellence,” Vora said.

Ambitions beyond earth 

Yet, Saudi Arabia’s cosmic ambitions extend far beyond the confines of earth’s atmosphere. 

With plans to develop a robust astronaut corps, participate in lunar exploration missions, and foster a thriving commercial space sector, the Kingdom is poised to carve out a formidable presence in the cosmos. 

Saudi Arabia is set to play a crucial role in the entire space value chain, focusing on localizing satellite technology production, enhancing space situational awareness, and utilizing space data for various sectors, including climate-related initiatives, according to Serco. 

A new report by the World Economic Forum predicts that the global space economy could reach $1.8 trillion by 2035, rivaling the semiconductor industry.  

Space technologies, like communications and earth observation, are expected to become as integral to daily life as semiconductors. 

The report emphasized that space will increasingly connect people and goods across industries, with benefits extending beyond financial gains to include addressing global challenges. 

Space endeavors are no longer an exclusive playground for government; it is increasingly becoming a key component of our day-to-day lives.

Amar Vora, head of space at Serco Middle East

“Intensified collaboration between diverse stakeholders from the public and private sectors will be key to unlocking and maximizing the industry’s exponential potential for years to come,” it added. 

From satellite manufacturing to space tourism, the Kingdom is primed to capitalize on the burgeoning space industry, diversifying its economy and driving innovation. 

Abdullah Al-Dawsari, who is an aerospace and defense project manager, told Arab News that “Saudi Arabia has the opportunity to leapfrog in key emerging areas of the space economy.” 

He said that this could be done through “strategically investing in next-generation capabilities by developing advanced satellite manufacturing using robotics, 3D printing, modular designs, offering low-cost launch services and rocket manufacturing by innovating in materials, propulsion, and reusability.” 

He added: “Providing innovative incentives like grants, tax benefits, and funding opportunities for research and development in the space sector and removing bureaucratic barriers can further stimulate the industry.” 

“Ultimately, space is becoming a cornerstone for economic growth, and this is exactly the vision and direction we are seeing from Saudi’s recent strides in space,” Serco’s top official said. 

The economic benefits of space exploration are manifold, according to Vora. Space technologies and data are critical assets for numerous industries, including agriculture, mobility, environment, defense, and many others.  

“We are seeing that space-enabled services have a role in the Saudi giga projects; for example, we see increased awareness, interest, and uptake from NEOM, Red Sea Global, and others,” he said. 

Economist and policy adviser, Mahmoud Khairy, said in an interview with Arab News that Saudi Arabia’s endeavors in space “isn’t just about reaching for the stars; it’s about building a smarter economy.” 

He added: “By venturing into space, Saudi Arabia aims to not only boost its global standing but also inspire young Saudis to pursue careers in science and tech. It’s all part of a bigger plan to transform the economy, putting the Kingdom on the map as a leader in space exploration while paving the way for a brighter, more sustainable future.”

Regulatory framework  

The Communications and Space Technology Commission has recently released regulations and a permit application to encourage private sector involvement in the earth observation services market. This initiative aims to boost GDP through value-added products. 

The initiative will grant permits to entities establishing EO platforms, facilitating data collection and processing. The documents outline requirements for applicants and emphasize user rights and data security. Interested parties are encouraged to review and apply for the permit.   

Key initiatives, such as the Center of Excellence for Earth and Space Science and the Center of Excellence for Aeronautics and Astronautics, underscore Saudi Arabia’s commitment to fostering world-class capabilities in space technology and research.  

Moreover, strategic partnerships with leading space agencies and organizations propel the Kingdom’s space aspirations to new heights. 

Vora emphasized that “strategic partnerships are essential in realizing the vision of the space sector in Saudi Arabia.” 

Saudi Arabia’s endeavors in space isn’t just about reaching for the stars; it’s about building a smarter economy.

Mahmoud Khairy, economist and policy adviser

He added: “For an emerging space-faring nation, partnerships enable effective knowledge transfer and opportunities to learn from past successes and failures. It allows the ability to share resources, risk, and infrastructure, advance scientific and technological research, and gain access to state-of-the-art innovations from a global ecosystem.” 

Vora explained that the most famous and widely referenced example of international partnerships and collaboration is the International Space Station, where it showcases the benefits of national collaboration. 

He went to say: “Private space companies providing both B2G (business to government) and B2B (business to business) services are now the norm, along with the utilization of space data-driven solutions across adjacent industries.” 

He went on explaining that this can be done by “introducing advanced technologies and services such as high-resolution imaging, data analytics for climate monitoring, urban planning solutions, and defense and security applications.” 

Al-Dawsari added: “Private companies, with their flexibility and innovative approaches, can significantly contribute to the space industry.” 

Private sector involvement in Saudi Arabia’s space industry has key implications for economic growth. It drives innovation, creates jobs, and attracts foreign investment, enhancing the Kingdom’s global competitiveness, according to Khairy.

A unique cosmic identity 

Beyond scientific and economic gains, Saudi Arabia’s cosmic journey holds profound societal implications.  

By inspiring the next generation of scientists, engineers, and explorers, the Kingdom is cultivating a legacy of innovation and discovery that transcends borders.  

“Beyond the clear economic benefits of Saudi’s endeavors in space, it undoubtedly has an impact on society,” Vora noted. 

National space endeavors along with international collaboration provides a catalyst for engagement in STEM fields through inspiration and integration into education, he highlighted. 

Vora added: “It’s great to see the mandate imposed by KSA last year to integrate space and earth sciences into secondary education curricula.” 

As Saudi Arabia ventures into space, the Kingdom remains committed to promoting sustainability and responsible stewardship of the cosmos.  

Sustainability comes in various forms in relation to Saudi’s space policy, according to Vora. 

“First, it’s KSA’s vision to create a sustainable, localized space industry and ecosystem — this requires support from the government in establishing an industry with long-term market opportunities,” he explained.  

Vora went on saying: “It’s how the national space program contributes toward Saudi’s vision to be a leader in environmental and climate sustainability. It’s what I call sustainability from space.”  

As space access becomes easier and launches more frequent, our space environment faces congestion and the risk of debris colliding with satellites. Improved technologies, regulations, and in-orbit solutions are needed to monitor and mitigate space debris.  

“Saudi space policy demonstrates leadership in this domain, enhancing the Kingdom’s role in the sustainability of space through investment in technologies to track and monitor space debris,” Vora emphasized. 

Khairy highlighted that space exploration requires a “whole army” of experts, from scientists and engineers to technicians and support staff.  

“As the space industry grows, so does the need for all sorts of services, from manufacturing to transportation. That means more jobs for Saudis across the board,” he added.

Sovereign wealth funds 

The pivotal role of sovereign wealth funds has become increasingly apparent in recent times, particularly in the Middle East.  

They have spearheaded economic diversification efforts, as reported by Euroconsult, a consulting firm specializing in the space sector. 

The report added: “Prominent funds like the UAE-based Mubadala Investment Company, the Saudi Public Investment Fund (PIF), and the Oman Investment Authority (OIA) have allocated substantial resources to finance local, regional and international space projects and companies.” 

Notable examples include partnerships like the one between Saudi Telecom Co. and PIF to establish IoT Squared, a technology firm specializing in the Internet of Things, as well as OIA’s acquisition of an equity stake in SpaceX. 

These investments not only support local, regional, and international space projects and companies but also bring tangible benefits to the countries involved, the report added. 

Economist Khairy said that the PIF is “already planning to invest heavily in the space sector and could be a major player in funding the Kingdom’s space dreams.” 

He added: “With its hefty financial resources and focus on long-term investments, it could provide the cash needed to launch satellites, conduct research, and build space infrastructure. Plus, investing in space could boost Saudi Arabia’s global reputation and competitiveness, drawing in even more investment and talent.” 

“When Saudi Arabia aims for the stars, it’s not just about the thrill of discovery; it’s about building a brighter economic future right here at home,” Khairy concluded. 


Arab Fund to launch observatory to address water scarcity

Arab Fund to launch observatory to address water scarcity
Updated 5 sec ago
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Arab Fund to launch observatory to address water scarcity

Arab Fund to launch observatory to address water scarcity

RIYADH: The Arab Fund for Economic and Social Development is set to launch a new Water Observatory aimed at boosting investments in sustainable water solutions across the region. Announced at the 16th session of the UN Convention to Combat Desertification’s Conference of the Parties in Riyadh, this initiative is designed to improve data collection and accessibility on water-related projects.

The observatory will provide vital data and insights to stakeholders, helping them make informed decisions to address the growing challenges of water scarcity.

The initiative is aligned with the Arab Fund’s ongoing commitment to combat water scarcity, a critical issue in a region where 12 countries face severe water shortages, each with less than 500 cubic meters of water per capita annually.

“Addressing water scarcity requires billions in investments, but these resources must be strategically allocated to create meaningful, long-term impact,” said Meza Hassan, senior adviser to the chairman of the Arab Fund for Economic and Social Development.

“By collaborating with regional and global partners from the public and private sectors, as well as financial institutions, we can address overconsumption and ensure water sustainability for future generations.”

The fund’s statement emphasized that the observatory will foster collaboration and attract investments aimed at solving the region's urgent water management challenges.

At COP16, the fund reaffirmed its commitment to enhancing regional water and food security, noting its support for the Riyadh Green Initiative. This is part of a broader $10 billion pledge by the Arab Coordination Group to promote sustainable development in the region.

In addition, the fund hosted two events. One focused on advancing water management policies, exploring innovative financing mechanisms, and fostering international partnerships. The other brought together private sector leaders to share strategies and experiences on successful water-related investments, emphasizing the essential role the private sector plays in addressing water scarcity.

Moreover, the Arab Fund held high-level bilateral meetings with ACG member states, senior government officials, and representatives from regional and global development organizations, including UN agencies. These discussions aimed to explore potential partnerships and co-financing opportunities to advance the Sustainable Development Goals across the Arab region.

To date, the Arab Fund has financed 671 projects totaling 10.72 billion Kuwaiti dinars ($34.87 billion), benefiting 22 countries.


Lebanon dollar-denominated bond rally sparks hope for reforms

Lebanon dollar-denominated bond rally sparks hope for reforms
Updated 51 min 48 sec ago
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Lebanon dollar-denominated bond rally sparks hope for reforms

Lebanon dollar-denominated bond rally sparks hope for reforms

RIYADH: A rally in Lebanon’s dollar-denominated bonds a day after Syrian militant groups removed President Bashar Al-Assad from power shows growing optimism for economic and governance reforms in the region, according to an expert.

Makram Makarem, a senior director at Beirut-based Investment and Capital Bank, told Arab News that the prospect of reduced external influence in Lebanon through Iranian proxies in Syria, as well as the weakening of Hezbollah, has boosted investor confidence.

Lebanon’s dollar-denominated bonds surged by 30 percent in 10 days, reaching 13 cents to the dollar on Dec. 9.

At least nine of the country’s dollar bonds, maturing between 2026 and 2037, traded above 12 cents, a significant rise from their average for much of the year. 

The 2029 bonds saw the largest increase, rising 2.03 cents to 12.76 cents on the dollar — the highest since December 2022.

Although still significantly below face value, the bonds have rallied multiple times since Israel’s recent military strikes in Lebanon. 

“This optimism stems from expectations of reduced political interference and greater focus on governance,” said Makarem.

The financial adviser at the Lebanese institution explained that the bond surge is driven by a combination of geopolitical and economic factors.

The removal of President Assad’s government has disrupted a crucial supply route for Hezbollah, the Iran-backed Lebanese militia designated as a terrorist group by the US.

He pointed out that this, coupled with growing expectations of a breakthrough in Lebanon’s long-stalled presidential election, has improved investor sentiment.

While the outlook is promising, Lebanon’s entrenched corruption and political inefficiencies pose challenges, requiring strong reforms and sustained international support for meaningful progress, he added.

On the economic front, Makarem underlined that ongoing state debt restructuring efforts and historical recovery rates for defaulted bonds, which typically range from 20 percent to 50 percent, “indicate that current bond levels are undervalued, with recovery estimates projected between 20 percent and 30 percent.”

Additionally, rising gold prices — which are positively correlated with Lebanon’s recovery prospects due to the country’s gold reserves — along with restructuring efforts in the banking sector, have raised growth expectations.

“However, sustaining this sentiment will depend on Lebanon’s ability to implement reforms and navigate its entrenched political and economic challenges,” he added.

Since Lebanon defaulted on its international debt in 2020, the nation has endured a severe economic crisis marked by hyperinflation, poverty, and political deadlock. With a caretaker government in place since 2022 and ongoing presidential election failures, significant reforms still need to be made. 

The bond rally has laid the groundwork for potential economic recovery by boosting confidence in Lebanon’s financial markets. 

“Lebanon’s broader recovery hinges on addressing systemic challenges like hyperinflation, a weak currency, and fragile institutions,” Makarem said, warning that without structural reforms and effective governance, the rally is unlikely to translate into sustained economic improvement.

Despite Lebanon’s dollar bonds nearly doubling from the average, as highlighted by Makarem, they remain almost 50 percent below their post-default highs, reflecting ongoing concerns about the country’s ability to achieve lasting financial stability and implement necessary reforms.


PIF launches Adeera to redefine Saudi hospitality with local brands

PIF launches Adeera to redefine Saudi hospitality with local brands
Updated 10 December 2024
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PIF launches Adeera to redefine Saudi hospitality with local brands

PIF launches Adeera to redefine Saudi hospitality with local brands

RIYADH: Saudi Arabia is making a significant move to develop its own homegrown hospitality brands with the launch of Adeera, a new hotel management company fully owned by the Public Investment Fund.

This new venture aims to introduce a variety of local hotel brands designed to meet the needs of a diverse range of visitors, from mid-range options to ultra-luxury accommodations.

As Saudi Arabia continues to position itself as a major global tourism destination, the launch of Adeera comes at a crucial time.

According to a press release, the company is poised to unlock new business opportunities within the Kingdom’s hospitality sector by focusing on the unique Saudi experience.

Adeera will work closely with hotel developers to maximize the involvement of the local private sector, creating a platform for the growth of homegrown hospitality brands.

Khalid Johar, co-head of PIF’s Local Real Estate Portfolio, emphasized the significance of the launch. “The timing of Adeera’s introduction aligns perfectly with Saudi Arabia’s expansion in hospitality and tourism. The company has the opportunity to help propel the sector forward by introducing innovative hotel brands, supporting the Kingdom’s growing reputation as a world-class tourism destination.”

Johar also highlighted that Adeera’s distinct focus on Saudi culture and traditions would give the company a competitive edge in a rapidly evolving market. The goal is to create an authentic Saudi hospitality experience that resonates with both local and international visitors, celebrating the Kingdom’s rich heritage while offering world-class service.

The launch of Adeera marks another key step in PIF’s broader efforts to diversify Saudi Arabia’s economy and drive sustainable growth.

The press release noted that this move follows several significant investments by PIF in the tourism and real estate sectors. These investments include the luxury boutique hotel company Boutique Group, which specializes in transforming historic and cultural palaces into upscale boutique hotels; Dan, an agri-tourism company; and Asfar, a tourism investment firm.

Saudi Arabia’s National Tourism Strategy is an ambitious plan aimed at attracting 150 million visitors and generating 10 percent of the country’s gross domestic product from tourism by 2030. PIF’s investments are aligned with this vision, focusing on strategic sectors such as infrastructure, real estate, technology, and renewable energy to help establish Saudi Arabia as a leading global investment hub.

In addition to strengthening local industries, PIF is also focused on fostering innovation, creating employment opportunities, and attracting international investment. Through these initiatives, the fund aims to ensure sustainable economic growth and enhance the Kingdom’s competitiveness on the global stage.

The Kingdom’s hotel sector is already experiencing significant growth. According to recent data from the Central Bank of Saudi Arabia, spending in hotels saw a notable week-on-week increase of 11.4 percent from Nov. 10 to 16, reaching SR399.7 million ($106.4 million).

This follows an 8.5 percent increase in hotel spending during the week of Oct. 13-19, despite a broader decline in point-of-sale transactions, as reported by SAMA.

This upward trend in hotel spending underscores the growing demand for high-quality accommodations and further highlights the potential for continued growth within the hospitality sector.

With Adeera, Saudi Arabia is poised to take a leading role in shaping the future of its hospitality industry, blending the best of modern hotel management with a deep respect for its cultural and historical roots.


Saudi Arabia, UAE banks to post strong credit growth in 2025: Fitch Ratings

Saudi Arabia, UAE banks to post strong credit growth in 2025: Fitch Ratings
Updated 10 December 2024
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Saudi Arabia, UAE banks to post strong credit growth in 2025: Fitch Ratings

Saudi Arabia, UAE banks to post strong credit growth in 2025: Fitch Ratings
  • Fitch Ratings projected banks in the Kingdom will witness a financing growth of around 12% in 2025
  • Report said that the gradual execution of giga-projects should continue to underpin banks’ interest

RIYADH: Banks operating in Saudi Arabia and the UAE are expected to post strong credit growth in 2025, driven by high crude prices and the expansion of the non-oil economy, according to an analysis. 

In its latest report, Fitch Ratings projected that banks in the Kingdom will witness a financing growth of around 12 percent in 2025, about twice the average of the Gulf Cooperation Council region. 

The US-based agency added that corporates will account for almost 65 percent to 70 percent of new financing among Saudi banks in 2025. 

The analysis echoes similar views to those put forward by Moody’s in November, which predicted that Saudi Arabia’s Vision 2030 initiative, aimed at diversifying the Kingdom’s economy, could accelerate the growth of the banking sector in the country. 

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In its report, Fitch Ratings said: “The operating environment for banks in the Kingdom is underpinned by high oil prices and government spending, which support the country’s giga-projects and the Vision 2030 strategy, resulting in solid non-oil gross domestic product growth.”

It added: “Fitch Ratings forecasts real non-oil GDP growth to average a still strong 4.5 percent over 2024–2025, compared to 5 percent over 2022–2023. We expect the sector’s financial metrics to remain strong in 2025.” 

The report said that the gradual execution of giga-projects should continue to underpin banks’ interest in this segment, although the current share of giga-project-related financing is minor for most rated banks.

However, the credit rating agency warned that the net foreign assets of banks in the Kingdom could continue to be negative in 2025 due to high-cost domestic term deposits and increased demand for foreign currencies. 

Regional outlook

According to the analysis, banks in the Middle East region are expected to maintain sound profitability, solid liquidity, and adequate capital buffers for their risk profiles in 2025, while asset quality should remain stable. 

In November, a report released by S&P Global said that banks in the GCC are expected to maintain strong asset quality, profitability, and ample liquidity through 2025 thanks to solid capitalization and well-managed balance sheets. 

S&P Global, however, warned that heightened geopolitical tensions and a sharp drop in oil prices could negatively affect the creditworthiness of financial institutions in the region. 

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UAE

Fitch said that banks in the UAE will enjoy favorable business and operating conditions in 2025 thanks to high oil prices and increased economic activities. 

The analysis added that banks in the Emirates will achieve a loan growth of around 9 percent in 2025, a figure well above the GCC average but slightly below its Arab neighbor, Saudi Arabia. 

“We expect UAE banks’ funding and liquidity to remain strong and deposits will continue growing in line with lending. Liquidity will continue to be supported by large government deposits, driven by the sovereign’s solid net external assets position, still-strong fiscal metrics and recurring hydrocarbon revenues,” added Fitch. 

Egypt

The report highlighted the growth of the banking sector in Egypt and said that general business and operating conditions for financial institutions in the country are expected to improve next year. 

According to Fitch, falling inflation, improved investor confidence, and healthy foreign currency liquidity conditions are some of the major factors that could strengthen the banking sector in Egypt in 2025. 

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Bahrain

In Bahrain, credit growth among banks is expected to be reasonable, albeit still modest, compared to GCC peers, at around 4.5 percent in 2025. 

“Fitch expects the business environment for banks in Bahrain to remain adequate, underpinned by some operating condition improvements. Lower lending rates should ease pressures on the sector’s corporate loan books, in particular real estate and contracting,” said the report. 

The credit rating agency predicted stable asset quality metrics for Bahraini banks in 2025, with lower rates providing relief to corporate borrowers and households and the sector profitability to remain sound.

Kuwait

According to the report, the banking sector’s credit growth in Kuwait is expected to hover between 5 percent and 6 percent in 2025, albeit hindered by still-high interest rates and only moderate real non-oil GDP growth. 

The analysis revealed that liquidity among Kuwaiti banks will remain strong next year due to large and stable deposits from government-related entities and gains from high oil prices. 

Oman

Fitch revealed that Oman’s Vision 2040 program aimed at diversifying the country’s economy could open more opportunities for banks in the future. 

“Oman’s Vision 2040 will provide growth opportunities for banks and ensure a healthy lending pipeline in key sectors of the economy, as well as reduce banks’ reliance on government spending in the long run. However, the absence of a deep capital market limits access for corporates to funding sources other than the country’s domestic banks,” said the study. 

The analysis added that liquidity among Omani banks will continue to be supported by stable government and government-related entity deposits, while high oil prices are expected to support the growth in customer deposits. 

Qatar

In Qatar, the general business and operating environment for banks are projected to improve in 2025. 

The report revealed that the credit growth among Qatari banks could pick up to 5.5 percent next year but will remain below that of Saudi Arabia and the UAE due to their particularly strong operating conditions. 

Jordan

In Jordan, the market conditions of banks are expected to remain challenging next year, while the sector will witness a lending growth of 3.5 percent. 

“The operating environment for banks in Jordan remains challenging due to below-potential and structurally weak real GDP growth, and high unemployment and geopolitical risks, which negatively affect tourism and exports,” concluded Fitch.


Fitch affirms Saudi Aramco at ‘A+’ with stable outlook

Fitch affirms Saudi Aramco at ‘A+’ with stable outlook
Updated 10 December 2024
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Fitch affirms Saudi Aramco at ‘A+’ with stable outlook

Fitch affirms Saudi Aramco at ‘A+’ with stable outlook

RIYADH: Fitch Ratings has reaffirmed Saudi Aramco’s long-term issuer default ratings at “A+” for both foreign- and local-currency ratings, with a stable outlook, reflecting the oil giant’s strong financial standing and its crucial role in the Saudi economy.

The rating is underpinned by Aramco’s robust financial profile, though it is capped by the rating of its majority shareholder, the Saudi government, which owns 81.48 percent of the company. The Public Investment Fund holds an additional 16 percent. According to Fitch, this structure influences Aramco’s ratings due to the government’s significant stake and control.

Fitch assigned Aramco a standalone credit profile of “aa+,” highlighting its solid financial position. The agency also gave the company a short-term IDR of “F1+,” which is aligned with the sovereign rating.

The affirmation comes after Aramco’s strong performance in 2023, when its total liquid production averaged 10.7 million barrels per day, and its hydrocarbon output reached 12.8 million barrels of oil equivalent per day. This performance outpaced major global peers, including Shell, TotalEnergies, and BP.

In its statement, Fitch noted that Aramco’s rating is constrained by Saudi Arabia’s rating, in line with Fitch’s Government-Related Entities Rating Criteria. This is due to the government’s substantial influence over Aramco, particularly its regulation of production levels in accordance with OPEC+ commitments.

Fitch also emphasized the company’s “Very Strong” governance, reflecting the government’s strategic oversight, including the ability to determine Aramco’s maximum sustainable oil production capacity.

Aramco’s conservative financial management further bolsters its credit profile, with the company’s leverage expected to remain lower than that of other major global oil and gas companies. Fitch also praised Aramco’s sustainable dividend policy, which is set to include a base dividend of $81.2 billion in 2024, with additional performance-linked payouts.

“Under our oil price assumptions, we expect Saudi Aramco’s capital expenditures and base dividend payments to be broadly covered by operating cash flow. We also assume that the company has the flexibility to adjust its dividend commitment if oil prices decline or if capital expenditures exceed current forecasts,” Fitch said.

In 2024, Aramco is expected to pay total dividends of $124 billion, including $43.1 billion in performance-linked payouts, reflecting record cash flows from 2022-23. Fitch forecasts a reduction in capital expenditures from $50 billion in 2024 to $35 billion by 2028, with annual dividends projected to decrease to $82 billion over the same period.

The agency also highlighted Aramco’s critical role in Saudi Arabia’s economy, noting the company’s importance as a key provider of feedstock for power generation and other essential industries, in addition to its vast reserves and production capacity.

Fitch anticipates that the Saudi government would provide support if needed, although the company’s strong financial position has historically not required direct state intervention.

On a national level, Fitch assigned Aramco a long-term rating of “AAA (sau)” based on its substantial reserve base, strong profitability, and market position.

The company’s standing was also compared favorably to other prominent Saudi entities, such as Saudi Basic Industries Corp. and Saudi Electricity Co., within Fitch’s National Scale Rating framework.