Moody’s upgrades Saudi Arabia’s rating on strong diversification progress and fiscal prudence

Moody’s upgrades Saudi Arabia’s rating on strong diversification progress and fiscal prudence
Moody’s expects Saudi Arabia’s non-hydrocarbon private sector GDP to continue expanding by about 4 percent to 5 percent in the coming years. (AFP file photo)
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Updated 24 November 2024
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Moody’s upgrades Saudi Arabia’s rating on strong diversification progress and fiscal prudence

Moody’s upgrades Saudi Arabia’s rating on strong diversification progress and fiscal prudence
  • Saudi Arabia’s local and foreign currency medium-term note program ratings was also upgraded to (P)Aa3 from (P)A1

RYADH: Global credit ratings agency Moody’s Ratings upgraded Saudi Arabia’s long-term local and foreign currency issuer and senior unsecured ratings to Aa3 from A1, taking note of the Kingdom’s progress in diversifying its economy.

Saudi Arabia’s local and foreign currency medium-term note program ratings was also upgraded to (P)Aa3 from (P)A1.

“Continued progress will, over time, further reduce Saudi Arabia’s exposure to oil market developments and long-term carbon transition,” the ratings agency said.

“The recent fiscal space exercise and recalibration and reprioritization of diversification projects – which will be regularly reviewed – will provide a more conducive environment for sustainable development of the kingdom’s non-hydrocarbon economy and help preserve the relative strength of the sovereign’s balance sheet.”

Moody’s expects Saudi Arabia’s non-hydrocarbon private sector GDP to continue expanding by about 4 percent to 5 percent in the coming years, among the highest in the Gulf region, as its diversification strategy reduces the Kingdom’s exposure to oil market developments and long-term carbon transition over time.

“Our baseline projections assume there will be no significant downward pressure to oil prices or production over the next few years. We also assume that heightened geopolitical tensions in the region, which are having a limited impact on Saudi Arabia so far, will not escalate into a full-scale military conflict between Israel and Iran with collateral effects that could affect the kingdom’s ability to export oil or deter private sector investment supporting the diversification momentum,” Moody’s said.

Saudi Arabia has invested heavily to induce growth in the non-hydrocarbon private sector, particularly that of the Public Investment Fund’s (PIF) outlays for capital expenditure and domestic investments.

“We estimate that the total spending on projects and long-term investments by the government and PIF will continue to exceed 20 percent of non-hydrocarbon GDP. Private consumption growth will also be strong, as the design of many ongoing projects, including the PIF’s giga projects and other large-scale projects of the government, incorporates commercialization phases that will boost supply-side capacity in the services sector, particularly in hospitality, leisure and entertainment, retail and restaurants,” Moody’s said.

The ratings agency also noted while Saudi Arabia’s fiscal prudence as well as recalibration and reprioritization of projects may affect project implementation and the development of the non-hydrocarbon sectors, “the focus on macroeconomic and fiscal sustainability is credit positive.”

“Regularly reviewing projects to maximize the economic impact on the domestic economy and develop a domestic industrial base and related ecosystems will help the non-hydrocarbon economy develop more sustainably,” Moody’s said.


Oil Updates — crude set for weekly loss on surplus fears   

Oil Updates — crude set for weekly loss on surplus fears   
Updated 06 December 2024
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Oil Updates — crude set for weekly loss on surplus fears   

Oil Updates — crude set for weekly loss on surplus fears   

LONDON: Oil prices fell on Friday as analysts continued to forecast a supply surplus in 2025 despite the OPEC+ decision to postpone planned supply increases and extend deep output cuts to the end of 2026, according to Reuters.  

Brent crude futures were down 66 cents, or 0.9 percent, to $71.43 per barrel at 2:28 p.m. Saudi time. US West Texas Intermediate crude futures were down 65 cents, or 1 percent, to $67.65 per barrel.  

For the week, Brent was on track to fall 2 percent, while WTI was on course for a 0.5 percent drop.  

The Organization of the Petroleum Exporting Countries and its allies on Thursday pushed back the start of oil output rises by three months until April and extended the full unwinding of cuts by a year until the end of 2026.  

The group, known as OPEC+ and responsible for about half of the world's oil output, was planning to start unwinding cuts from October 2024, but a slowdown in global demand — especially in China — and rising output elsewhere have forced it to postpone the plan several times.  

“The outcome of the latest meeting of OPEC+ members surprised us positively ... The extension of the production cuts shows the group remains united and is still targeting to keep the oil market in balance,” UBS analyst Giovanni Staunovo said.  

Pressuring prices on Friday, analysts reiterated expectations of a supply surplus next year, although some of them now view a smaller surplus than before.  

Bank of America forecasts increasing oil surpluses to drive Brent to average $65 a barrel in 2025, while expecting oil demand growth to rebound to 1 million barrels per day next year, the bank said in a note on Friday.  

HSBC, meanwhile, now expects a smaller oil market surplus of 0.2 million bpd, from 0.5 million bpd previously, it said in a note.  

Brent has largely stayed in a tight range of $70-75 per barrel in the past month, as investors weighed weak demand signals in China and heightened geopolitical risk in the Middle East.  

“The general narrative is that the market is stuck in its rather narrow range. While immediate developments might push it out of this range on the upside briefly, the medium-term view remains rather pessimistic,” PVM analyst Tamas Varga said.  


Youth empowerment takes center stage at COP16   

Youth empowerment takes center stage at COP16   
Updated 06 December 2024
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Youth empowerment takes center stage at COP16   

Youth empowerment takes center stage at COP16   
  • COP16 has highlighted innovative youth-led initiatives and addressed the systemic challenges faced by young leaders in advancing sustainable land management
  • COP16 has also provided a platform for young leaders from across the globe to share their solutions to land degradation

RIYADH: Youth empowerment has emerged as a focal point at the UN Convention to Combat Desertification conference.

COP16 has highlighted innovative youth-led initiatives and addressed the systemic challenges faced by young leaders in advancing sustainable land management. 

The conference, which began on Dec. 2, aligns with Saudi Arabia’s Vision 2030 and the Kingdom’s commitment to engaging its youth in tackling climate challenges. Key discussions have underscored the importance of integrating young voices into policy-making and decision-making processes. 

Catalysts for change 

Among the most pressing topics discussed at COP16 is the need to give young people a seat at the decision-making table.

Speaking during the lead-up to the conference, Catarina Lorenzo, a 16-year-old youth climate champion, made a passionate case for including younger generations in the shaping of solutions to the environmental crises they will inherit.

“When we bring children to the table, we also bring the voice of nature,” she explained. “Effective actions have to be made now. We want to join in the negotiation spaces, and beyond that we want to be taken seriously.” 

This urgency was echoed by Jorge Leyva of the International Forestry Students’ Association, who said that while young voices were increasingly visible at global forums, their influence on actual policy decisions remained limited.

“We are the next generation, and we are not going to wait,” he said. “If we don’t have a seat at the table now, how will we know what comes next?” Leyva emphasized the frustration felt by many young leaders, who are often relegated to observation roles rather than being involved in substantive discussions. 

Youth empowerment 

As COP16’s host nation, Saudi Arabia has highlighted its commitment to empowering young people through initiatives such as the Green Saudi Initiative, which have mobilized thousands of young Saudis in afforestation and land restoration projects. 

“Saudi Arabia is leading by example in integrating young people into the heart of its sustainability efforts,” said Ibrahim Thiaw, executive secretary of the UNCCD. “Empowering youth is essential for achieving sustainable land management. Their voices bring fresh perspectives and the drive to innovate that is indispensable for addressing the challenges we face today.” 

Among the initiatives highlighted was a project by young Saudis that uses drones to plant seeds in degraded areas, blending technology with traditional land restoration techniques.  

Youth-led initiatives  

COP16 has also provided a platform for young leaders from across the globe to share their solutions to land degradation.

Lorenzo highlighted the unique knowledge children and youth bring to the discussion. “Children are often the most vulnerable to the impacts of climate change, from floods to loss of education opportunities,” she explained. “We are the best people to talk about the impact we receive and what our communities need.” 

These perspectives are not only vital but also often transformative. From using social media to raise awareness about local environmental challenges to leveraging indigenous knowledge in land management, youth-led projects have demonstrated the power of combining grassroots activism with innovative technologies. 

Despite the successes, COP16 participants have pointed out significant barriers to youth involvement. Lorenzo highlighted the lack of financial support for youth-led projects, noting that only 2 percent of global philanthropic funding directly benefited children and youth.

“This needs to change,” she said. 

Leyva added that young leaders often felt dismissed by older decision-makers: “They think that because we are students or maybe so young, we don’t have the knowledge to contribute. But we have a different perspective — one rooted in today’s realities and challenges, which older generations may not fully grasp.” 

To address these gaps, COP16 has introduced measures to boost youth participation, including mentorship programs to develop technical expertise in sustainable land management and commitments to integrate youth perspectives into policy frameworks. 

International collaboration  

The conference has also facilitated cross-border knowledge sharing, with young representatives from Africa, Asia and Latin America discussing their approaches to combating land degradation. 

Delegates from Burkina Faso, for example, shared how combining traditional agricultural practices with modern tools has helped build drought resilience. 

“When we share our experiences and knowledge across borders, we create a stronger foundation for sustainable action,” said one delegate. 

Driving tangible outcomes

In addition to its national programs, Saudi Arabia has taken a leadership role in the region by promoting youth engagement in environmental sustainability. The Kingdom’s National Afforestation Project, which aims to plant 10 billion trees, has actively involved young people in both planning and implementation. 

Saudi youth delegates expressed pride in their country’s efforts and, as COP16 progresses, the focus on youth empowerment remains a key theme. For young leaders like Lorenzo and Leyva, the event represents a vital opportunity to amplify their voices and push for tangible outcomes. However, they emphasize that their participation must lead to action, not just recognition. 

“Negotiators clap for our speeches,” Lorenzo noted, “but when it comes time to create resolutions, our input is often overlooked. That has to change.”  

By providing a platform for young leaders to connect with global stakeholders and share their ideas, COP16 has taken an important step toward fostering intergenerational collaboration. 

While significant challenges remain, the initiatives and discussions shown so far demonstrate a clear path toward building a more resilient and sustainable world — led, in part, by the energy and creativity of youth. 


Saudi Arabia’s real estate loans hit $226bn, fueled by retail and corporate demand 

Saudi Arabia’s real estate loans hit $226bn, fueled by retail and corporate demand 
Updated 06 December 2024
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Saudi Arabia’s real estate loans hit $226bn, fueled by retail and corporate demand 

Saudi Arabia’s real estate loans hit $226bn, fueled by retail and corporate demand 

RIYADH: Saudi banks’ real estate loans surged to a record SR846.48 billion ($225.73 billion) in the third quarter of 2024, marking a 13.29 percent annual increase, official data showed. 

Data from the Saudi Central Bank, also known as SAMA, indicated that this growth was driven by both retail and corporate lending, with corporate loans experiencing a 22 percent increase to reach SR189.6 billion.  

Lending to individuals made up the lion’s share, accounting for 78 percent of the total at SR656.88 billion, reflecting an annual growth rate of 11.02 percent. 

Real estate loans now comprise 29.67 percent of Saudi banks’ total loan portfolio, which stood at SR2.85 trillion by the end of the third quarter.  

The sector’s unprecedented expansion is underpinned by government-backed initiatives under Vision 2030, which aim to diversify the economy and address the Kingdom’s growing housing demand.  

A pivotal regulatory milestone came in 2018, when the Saudi Central Bank increased the maximum loan-to-value ratio for first-time homebuyers from 85 percent to 90 percent. 

This strategic move was designed to stimulate mortgage lending, making homeownership more accessible to Saudi citizens while aligning with the Kingdom’s broader economic reform plans.  

By enabling more citizens to secure financing for their first homes, the initiative directly supported the national housing strategy, which aims to boost homeownership rates and expand housing options across the country. 

SAMA emphasized maintaining financial stability, ensuring that this policy shift would not compromise the resilience of the banking sector or lead to unsustainable lending practices. 

Another factor supporting the real estate sector’s growth is recent monetary easing. After two years of aggressive rate hikes to curb inflation, SAMA lowered interest rates by 50 basis points in September and another 25 basis points in November, mirroring the US Federal Reserve’s monetary policy. 

These cuts have made borrowing cheaper, spurring demand for real estate loans.  

However, this surge in demand has a dual effect. While it boosts credit uptake, it also exerts upward pressure on housing prices, contributing to inflation. 

Saudi Arabia’s annual inflation rate reached 1.9 percent in October, driven primarily by higher housing costs, according to the General Authority for Statistics. 

Despite this rise, the Kingdom’s inflation remains among the lowest in the Middle East, underscoring the efficacy of its economic stabilization strategies and its resilience against global inflationary pressures. 

New retail mortgages highest in 21 months  

Saudi banks issued SR8.14 billion in new residential mortgages in October, marking the highest monthly figure in 21 months and a 20.33 percent increase from October last year. 

The capital, Riyadh, has emerged as a focal point of this surge, fueled by robust population and employment growth that has intensified demand for housing, with new properties struggling to keep pace.  

Of the total residential loans in October, SR4.83 billion, or 59.3 percent, was directed toward purchasing houses, while 35 percent was allocated to apartments and 5.6 percent to land.  

Apartment financing saw the most significant annual growth, surging 47 percent year on year to SR2.86 billion, followed by land financing at 24.8 percent and house loans at 8.37 percent.  

For the third quarter of 2024, the value of new residential mortgages reached SR20.49 billion, reflecting an 11.34 percent increase compared to the same period last year. This growth was largely driven by demand for apartments, with lending in this segment soaring 58.76 percent year-on-year to SR7.25 billion.  

While lending for land rose 19.16 percent to SR1.19 billion during the quarter, loans for houses declined 6.13 percent to SR12.06 billion. 

The increasing prominence of apartment financing highlights a shift in Saudi Arabia’s housing market, reflecting evolving demographics and lifestyle preferences. Apartments appeal to expatriates and smaller families while also addressing affordability concerns.  

According to S&P Global, population growth, averaging 3.3 percent annually through 2027, and a surge in expatriate inflows are fueling demand, particularly in Riyadh. 

This factor, coupled with job opportunities, is outpacing the delivery of new housing units.

According to JLL’s KSA market dynamics report for the first half of 2024, 16,200 units were added in Riyadh and 11,300 in Jeddah during this period, with another 16,000 units expected in both cities by the end of the year. 

However, despite this growth, supply constraints continue to push prices higher. High construction costs and competition with Vision 2030 projects are limiting housing affordability.

Additionally, Saudi Arabia’s real estate market is navigating regulatory changes to attract foreign direct investment. While FDI inflows currently average 2 percent of GDP, they are expected to grow as reforms unfold, including new residency visa options tied to real estate investments, according to S&P Global. 

As mortgage infrastructure matures, spearheaded by entities like the Saudi Real Estate Refinance Co., the market is poised for increased liquidity and growth.

Secondary mortgage market

Saudi Arabia is embarking on a transformative journey to establish a secondary mortgage market, a move set to redefine the Kingdom’s housing and financial sectors.

With two major agreements in place, the country is strategically aligning global expertise with local execution to ensure liquidity in housing finance, boost homeownership, and foster economic diversification in line with Vision 2030.

In a landmark development, the Saudi Real Estate Refinance Co., a subsidiary of the Public Investment Fund, signed a memorandum of understanding with BlackRock, the world’s largest asset manager.

The agreement, finalized during a high-profile visit by Majid Al-Hogail, minister of municipal and rural affairs and housing, to the US, underscores the Kingdom’s commitment to leveraging global expertise to develop its mortgage finance ecosystem.

The partnership with BlackRock is expected to play a pivotal role in creating a functional secondary mortgage market by laying the groundwork for mortgage-backed securities.

BlackRock’s extensive knowledge of global financial markets will be instrumental in structuring these securities, designed to improve market liquidity by enabling banks to sell bundled mortgage loans to investors.

This influx of liquidity is anticipated to reduce borrowing costs for Saudi families, making homeownership more affordable.

Robert Kapito, BlackRock’s president, described the collaboration as a key step in aligning Saudi Arabia’s real estate finance market with international capital markets. He emphasized the potential for this initiative to not only support local housing goals but also attract global investment.

Meanwhile, SRC has also signed a separate agreement with Al-Ahli Bank and the Real Estate Development Fund to operationalize the secondary mortgage market at a local level.

This tripartite partnership focuses on creating and refinancing mortgage portfolios, ensuring the housing finance market has continuous access to funding.

The initiative is also set to fast-track the issuance of mortgage-backed securities in the domestic market, laying a solid foundation for sustainable growth in the sector.

As mortgage origination grows, so does the need for a secondary market to manage liquidity effectively.

SRC CEO Majeed Al-Abduljabbar described the partnership with Al-Ahli Bank as a critical step in addressing these challenges. By enabling banks to securitize mortgages and sell them as MBS, the initiative will enhance liquidity, reduce financing costs, and expand housing options for citizens.

These partnerships come at a pivotal time for the Kingdom, where the housing sector is central to Vision 2030’s objectives of raising homeownership rates to 70 percent and reducing economic reliance on oil revenues.

By integrating the real estate finance sector into global capital markets, Saudi Arabia is not only ensuring affordable housing but also positioning itself as a regional leader in innovative financial solutions.


Saudi Arabia unveils Riyadh Action Agenda to address land restoration, drought 

Saudi Arabia unveils Riyadh Action Agenda to address land restoration, drought 
Updated 06 December 2024
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Saudi Arabia unveils Riyadh Action Agenda to address land restoration, drought 

Saudi Arabia unveils Riyadh Action Agenda to address land restoration, drought 
  • Initiative launched during Agri-Food System Day at COP16 in Riyadh 

RIYADH: Saudi Arabia has introduced the Riyadh Action Agenda, an initiative to unite stakeholders in tackling land degradation, desertification, and drought. 

The announcement was made by Osama Faqeeha, deputy minister for environment at the Ministry of Environment, Water and Agriculture, and advisor to the UNCCD COP16 presidency, during a keynote address at a high-level dialogue on sustainable agri-food systems. 

The agenda will leverage COP16’s momentum over the two-year presidency, engaging diverse stakeholders to drive tangible impact for farmers, indigenous peoples, and other affected groups. 

Speaking during a keynote address, Faqeeha said: “If we are to accelerate land restoration and drought resilience initiatives at the pace and scale required, then it is critical we continue to mobilize and incentivize action long after COP16 in Riyadh ends, reaffirming Saudi Arabia’s leadership in land restoration, and leaving a lasting legacy of global change.”  

The launch took place on Agri-Food System Day, one of seven thematic days at COP16. Agriculture, a leading driver of land degradation, accounts for 23 percent of global greenhouse gas emissions, 80 percent of deforestation, and 70 percent of freshwater use, according to the UNCCD. 

Agri-Food System Day featured discussions on sustainable agricultural practices, with topics including soil health, resilient crops, and private sector involvement in transforming food systems. The day coincided with World Soil Day, which highlights the importance of sustainable soil management. 

“Around 95 percent of our food comes from the soil, and yet we continue to treat it like dirt,” Faqeeha said. “Unsustainable practices are causing significant soil loss annually, worsening global food and water security, and affecting farmers and consumers alike.” 

The UNCCD estimates that by 2050, global crop yields could decline by 10 percent, with worst-hit regions facing a 50 percent drop. Food prices could rise by 30 percent due to shrinking arable land and rising population demands. 

“We do not need to reinvent the wheel to deliver urgent solutions,” Faqeeha added. “Reinvesting harmful agricultural subsidies could immediately support land restoration and reform unsustainable practices.” 

The UNCCD COP16 conference, themed Our Land. Our Future., is being held from Dec. 2-13, 2024, at Boulevard Riyadh World. The event marks the UNCCD’s 30th anniversary and aims to address issues like drought resilience and land tenure. 


Saudi Arabia surpasses Vision 2030 target of 1m volunteers ahead of time

Saudi Arabia surpasses Vision 2030 target of 1m volunteers ahead of time
Updated 05 December 2024
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Saudi Arabia surpasses Vision 2030 target of 1m volunteers ahead of time

Saudi Arabia surpasses Vision 2030 target of 1m volunteers ahead of time

RIYADH: Saudi Arabia has surpassed its Vision 2030 target of 1 million volunteers six years ahead of schedule, according to the CEO of the National Center for Non-Profit Sector.

Speaking to Arab News on the sidelines on the fourth day of COP16, Ahmed Al-Suwailem explained that the Kingdom’s volunteering journey achieved the target just prior to the end of 2024.

This falls in line with promoting the concept of volunteering and community participation in Saudi Arabia.

“Today, we are celebrating the biggest achievement that we did in terms of volunteering. Of course, I will start with my thanks and gratitude to his majesty, the Custodian of the Two Holy Mosques, King Salman bin Abdulaziz, and also his Crown Prince, the Prime Minister, Prince Mohammed bin Salman bin Abdulaziz, for their unbelievable effort and support, for us, and they enabled us to achieve, this amazing target of 1 million volunteers, 1 million per annum,” Al-Suwailem said.

He added: “Absolutely, we have achieved the target earlier than we were supposed to achieve it, or 2030. We achieved it just before the end of 2024. We have achieved 1 million, as I said, per annum. We were supposed to achieve it in 2030.”

He added: “We are going for a further target and we are now reviewing the target again, and we’ll see what we will achieve in 2030.”

With regards to achieving the target, Al-Suwailem said: “We couldn’t achieve that unless we have this amazing, unbelievable, continuous support from our leadership and also with an enablement from our people,” he said.

He added that the public’s volunteer support is evident in their efforts, thoughts, and shared experiences.

“We are trying our best to send our message as the people of Saudi Arabia, that we are global citizens, that we can also do our volunteering internally and internationally,” he added.

The CEO also highlighted how this achievement will support the Kingdom’s Vision 2030, underlining that volunteering will play a key role in helping the company meet the objectives of the Saudi Green Initiative. The undertaking aims to diversify the economy, reduce oil dependency, and promote sustainable development.

He added: “So, this is where we complete each other as governmental entities and also private sector and the nonprofit sector.”

The CEO concluded by saying: “And of course, last but not least, people are the key element for achieving all these targets.”

The Kingdom’s hosting of COP16 reflects its commitment to protecting the planet. In the largest multilateral conference it has ever hosted, Saudi Arabia is mobilizing the world to deliver international cooperation, change, and action that our land so desperately needs.