Saudi Arabia’s non-oil sector records rapid growth with PMI at 57.5 in December 

Jeddah - Yasmine El Tohamy - RIYADH: Saudi Arabia’s economy is likely to grow by 4.4 percent in 2024, Aljazira Capital has predicted in its year-end report.

The forecast is in line with the Kingdom’s Finance Ministry’s projection for the current year, whereas Moody’s predicted a 4.6 percent increase in 2024. 

In the report, the financial brokerage firm highlighted that Saudi Arabia’s economic acceleration is expected to be propelled by the execution of megaprojects, Vision 2030 initiatives, government spending, and increased participation of the private sector.  

On a broader economic scale, the firm added that increasing consumer spending, a decrease in the unemployment rate, and the expansion of non-oil private sector activity signal favorable economic conditions.

Additionally, it noted that control over inflation further supports the positive economic outlook.   

Aljazira Capital stated: “Saudi Arabia’s GDP (gross domestic product) is expected to expand by 4.4 percent in FY24E on the back of growth in the private sector amid the implementation of programs under Saudi Vision 2030. Weak oil revenues would be offset by growth in non-oil revenues.” 

It expects interest rate cuts to free up liquidity among international investors, possibly bringing in foreign inflows.  

The firm also anticipates that the main Saudi stock market will achieve gains of around 10 percent in 2024, supported by increased liquidity.  

The report highlighted a set of economic factors supporting its outlook for the new year, both globally and locally. These factors include interest rates reaching their peak in advanced economies, coinciding with a decline in inflation. 

This is expected to result in a global economic slowdown, achieving a soft landing without entering a recession in 2024, it added. 

The Saudi brokerage house also added that expectations indicate the US Federal Reserve will cut interest rates by 100 basis points this year. 

Consequently, it is expected that the Saudi Central Bank, known as SAMA, will follow the same approach as the Federal Reserve. This expectation arises from the pegging of the Saudi riyal to the US dollar, with plans to reduce the repo rate by 100 basis points to 5 percent in 2024. 

Despite the negative impact of slowing economic activities globally on oil demand and concerns about oversupply in 2023, Aljazira Capital expects the average Brent crude oil price to remain above $80 per barrel in 2024. 

It noted that the policies of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, will play a crucial role in determining oil market trends amid concerns about increased US supply.

Analysts at the firm wrote in their report that the Tadawul All Share Index, also known as TASI, in the main Saudi market, is likely to rise in 2024, supported by corporate profit growth and increased liquidity in the stock market.  

“Our earnings estimate for FY24E translates into an EPS (earnings per share) of SR691 ($184) and a fair value of 13,123 points for TASI, implying an upside of 13.1 percent for the current level,” the analysts wrote. 

The research document indicated positive expectations for the banking sector, along with specific stocks in retail, applications, and technology. Additionally, it anticipates favorable performance in stocks related to communication services and tourism.