The Saudi economy witnessed a recovery in 2018, reflecting
the underlying momentum of growth as well as government
initiatives designed to foster economic growth and business
confidence. These initiatives were targeted in particular at
the non-oil private sector.
Non-oil growth in 2018 was higher than in 2017 and is
forecast to continue to strengthen in 2019, supported by
government spending and Vision 2030 economic reform programs.
Business confidence has improved. Unemployment fell to 5.7% at
the end of Q1 2019, compared to 6.0% in Q4 2018. The
development of the non-oil private sector and increasing
financial development and inclusiveness should provide the
basis for stronger, more sustainable and better-balanced
economic growth in the future.
In terms of competitiveness, Saudi Arabia's ranking in the
World Economic Forum Competitiveness Index has improved and the
country now ranks 39th of 140 economies, with a particularly
high ranking (equal first with 30 other countries) for
In mid-2019, credit rating agencies reaffirmed their
ratings: Moody's, A1 with a stable outlook; and Fitch, A+ with
a stable outlook. Saudi Aramco's first public bond issue was
rated A+ by Fitch and A1 by Moody's.
Reflecting the successful implementation of capital market
reforms in line with Vision 2030, Saudi equity and bond markets
are being included in international indices. This is expected
to attract higher capital inflows that will stimulate economic
activity and accelerate economic growth, which should further
boost international investor confidence. FDI inflows picked up
from a low point in 2017 and reached $1.2 billion in Q1 2019,
compared to $829 million in Q4 2018.
Monetary policy continues to be anchored by the commitment
to a stable exchange rate between the Saudi Arabian riyal (SAR)
and the US dollar. Saudi riyal interest rates closely track
dollar interest rates at low levels. The Saudi Arabian Monetary
Authority (SAMA) actively uses a variety of macro-prudential
and liquidity management tools to help ensure that financial
conditions in the economy remain appropriate, within the
context of the exchange rate peg.
The Saudi banking landscape is also undergoing changes, with
one bank merger completed and another under discussion. These
mergers will enhance the overall efficiency of the banking
industry and create stronger institutions to compete in
regional and international markets.
The Saudi economy, as with other emerging economies, is
increasingly integrated with global financial markets. SAMA
actively monitors both local and global markets to assess
challenges that may impact domestic monetary and financial
stability. It is undertaking various steps to foster a healthy
and robust domestic banking system that can better support
private sector growth, particularly in the SME sector. At the
same time, SAMA is contributing to the development of technical
infrastructure (for instance, in fintech) that will also
benefit non-banking operators.
Financial deepening is high on the domestic policy agenda,
with financial inclusion being an objective of the Financial
Sector Development Program launched under Vision 2030. As part
of the program, SAMA is working on a nationwide initiative to
improve financial literacy.