Davos 2022 salutes the Saudi economy, but the Kingdom must continue its reforms


Davos 2022 salutes the Saudi economy, but the Kingdom must continue its reforms

Despite the two difficult years that the global economy has gone through – due to the COVID-19 pandemic, the Russian-Ukrainian conflict and unprecedented increases in the inflation rate – the Saudi economy has remained firm.

The Saudi delegation that participated in the World Economic Forum (WEF) in Davos this year, from May 22 to 26, explained in several panel discussions the reasons for the strength of the national economy and how it managed to successfully navigate on such a difficult path.

Saudi Arabia’s gross domestic product rose 9.6% in the first quarter of this year, growth not seen since 2011. This was driven by the oil sector which jumped 20.4%, the non oil which increased by 3.7% and the public sector. which was 2.4 percent higher.

There was also significant growth in sectors such as digital technology and tourism during the period.

The holiday sector has seen the number of tourists coming to the country increase from 41 million tourists in 2019 to 63 million in 2021. Rapid issuance of tourist visas and application for licenses from tourism-related businesses have helped the sector to grow vigorously. This lifted the Kingdom 10 places in the World Economic Forum’s 2021 Travel and Tourism Development Index, to 33rd place.

It should be noted that in 2019, Saudi Arabia launched its National Tourism Strategy, which laid out a clear plan to advance the goals of the Kingdom’s Vision 2030 social and economic reform agenda. This plans to increase the contribution of the tourism sector to 10% of GDP, create one million new jobs and attract 100 million local and international visitors per year by 2030.

The empowerment of Saudi women in tech has also improved, with women’s participation in the industry rising from 7% in 2016 to 29% in 2021, surpassing the G20 and EU average of 27. %.

Last but not least, foreign direct investment, a key catalyst for investing in technology and attracting know-how, has shown significant improvement. It has grown from less than 1% of GDP in 2016 to 2.3% in 2021, with total investments reaching $20 billion.

WEF President Børge Brende hailed the ongoing socio-economic reforms in the Kingdom. He said: “You see women driving and when you come to hotels or restaurants, you see that women are a natural part of society.” Among other significant changes underway in Saudi Arabia, Brende described investments in economic diversification, new technologies, education and skills as noteworthy.

However, despite these improvements, he believes that Saudi Arabia needs to produce goods and services that rank higher in the value chain in the coming years and use more technology on its production lines. Additionally, there are areas where the Kingdom can further improve its tax system and red tape, the WEF chief said.

Based on the idea that Saudi Arabia is rising because other Gulf countries are faltering, Faisal Abbas, editor-in-chief of Arab News, raised an important question during one of the WEF panels to which the Saudi delegation participated. Abbas asked if progress in the Kingdom would accelerate regional growth, or would it come at the expense of other countries in the region?

The panel confirmed that progress across Saudi Arabia is in the interest of the region as a whole, as it will boost competitiveness in the Gulf. However, this requires integration, coordination and collaboration, which they say happens.

Despite severe disruptions in the global economy, many forecasters believe the Saudi economy will manage to become an economic powerhouse with a GDP expected to top $1 trillion this year and rank 15th among global economies by now. 2030.

But such ambitious goals will not be achieved without facing a number of challenges, such as maintaining medium- and long-term fiscal sustainability, as well as managing unexpected global economic shocks. Saudi Arabia must also continue to implement its economic and structural reforms to strengthen its competitiveness.

• Talat Zaki Hafiz is an economist and financial analyst. Twitter: @TalatHafiz

Disclaimer: The opinions expressed by the authors in this section are their own and do not necessarily reflect the views of Arab News

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