A key contributor to this anticipated recovery is the normalization of oil production levels. Earlier in the year, production cuts had weighed on the economy, but with the gradual resumption of higher output levels, the oil sector is expected to provide a substantial boost to overall GDP growth. Analysts forecast that this rebound in oil production, coupled with sustained high oil prices, will fuel government revenues and support broader economic activities.
In addition to the oil sector, Saudi Arabia's non-oil economy is showing resilience. The Kingdom’s Vision 2030 initiative, which aims to diversify the economy away from oil dependency, continues to play a critical role. Major investments in infrastructure, technology, and renewable energy projects are driving growth in various sectors. The construction industry, in particular, is expected to benefit from these investments, with large-scale projects providing momentum for the second half of the year.
Private consumption, however, is likely to remain subdued due to tighter financial conditions, which have dampened consumer spending in the first half of 2024. Despite this, government efforts to control spending and focus on strategic investments are expected to stabilize the economy, preventing a significant downturn in consumer confidence.
The global economic environment also plays a role in shaping Saudi Arabia’s economic outlook. While global growth is facing headwinds, particularly in key markets like Europe and Asia, Saudi Arabia's economic diversification efforts are helping to mitigate some of these external risks. Non-oil exports are likely to face challenges due to slowing global demand, but the steady domestic demand for capital inputs and raw materials, driven by ongoing construction and industrial expansion, will help balance this impact.
Overall, the outlook for Saudi Arabia in the latter half of 2024 is cautiously optimistic. The combination of stabilizing oil production, continued investments in Vision 2030 projects, and a resilient non-oil economy are expected to drive growth, setting the stage for a more robust economic performance as the year concludes.