Saudi, UAE boost growth with infrastructure and tourism

Saudi Arabia and UAE Drive Economic Growth with Infrastructure and Tourism Boost

November 17, 2024

The Saudi and UAE economies are projected to grow over the next two years due to massive infrastructure projects in the region and strong tourism and hospitality sectors in Dubai.

Geopolitical events in the past two years have not had a significant impact on the Saudi economy and projects in Abu Dhabi and Dubai, the Institute of International Finance (IIF).

“The Saudi economy continues to benefit from the implementation of major infrastructure projects funded by the Public Investment Fund (PIF) and the National Development Fund (NDF),” said the Washington-based IIF, which owns more than 400 leading Western banks.

The report said it expects oil production cuts to gradually rise to 4.8 percent in 2025, up from 1.1 percent in 2024.

“We expect Saudi Arabia’s oil production to increase by 8.4 percent in 2025, compared to an overall decline of 14.6 percent in 2023-2024…Non-oil GDP growth driven by private consumption and public investment should be strong at 4.6 percent.”

According to the report, titled “IIF Note on GCC”, investments abroad through the BIF continue to drain resident capital, which is expected to reach $80 billion by 2024.

It estimates public foreign assets (official reserves and PIF assets) at about $1.3 trillion, nearly 117 percent of GDP.

“An ambitious reform agenda supports Saudi Arabia’s economic diversification efforts away from oil to boost potential growth. Considerable progress has been made in improving the business environment, including facilitating online licensing and 100 percent foreign ownership of projects,” the report noted.

Turning to the UAE, the IIF said it expects current macroeconomic performance and the near-term outlook to remain positive.

“The economy will experience strong growth of 4 percent in 2024 and 2025, supported by continued strong domestic demand. Dubai’s strong growth continues to be driven by tourism and hospitality,” it said.

The report says that the UAE is a major regional destination for FDI inflows, attracting about $30 billion by 2023, nearly 6 percent of GDP, the highest among emerging economies.

A large FDI inflow is attributed to a friendly business environment, good infrastructure and what is described as a diversified economy by regional standards.

The UAE’s “strengthened” appeal to international investors can be attributed to a confluence of strategic reforms, including allowing 100 percent foreign ownership in certain sectors, enhanced intellectual property protection and streamlined licensing procedures, the report said.

“The UAE Central Bank has introduced comprehensive regulations to oversee digital currencies, which has helped attract global investors and build confidence in digital currency markets. Digital currency issuance is part of its roadmap for 2023-2026,” it added.