From NEOM to AI and tourism, Saudi Arabia’s priorities are shifting
Digital rendering of NEOM’s The Line project in Saudi Arabia
Line, NEOM
When Saudi Arabia first announced plans to reinvent its oil-based economy, massive infrastructure projects such as the futuristic district NEOM and the smart city The Line were promoted as central to the transformation.
But almost a decade has passed since the launch of the “Vision 2030” transformation strategy, and Riyadh’s priorities have changed over time.
Technology and artificial intelligence are now among the kingdom’s main priorities.
“We’re reprioritizing a little bit the sectors that need it the most, and today it’s technology, artificial intelligence,” Saudi economy minister Faisal Alibrahim told CNBC on Wednesday. he said.
“We want to move to an economic structure that is efficiency-driven and has technology, innovation and productive AI at the center of productivity,” he told CNBC’s Dan Murphy on the sidelines of the Future Investment Initiative (FII) in Riyadh.
Riyadh’s Vision 2030 strategy to diversify its economy away from oil has seen it investS.Mainly in the fields of tourism, cultural and sports events, technology and infrastructure.
“Our main goal is non-oil growth, and non-oil growth is growing steadily, this is the main driver of our economic growth,” Alibrahim said, noting that non-oil activities now represent 56% of the total real GDP in Saudi Arabia.
“All our transformation efforts are to achieve non-oil growth so that we can diversify our economy from being dependent on a single commodity price and the size of the government budget, but also relying on the dynamism of the private sector and being ready for the future.”
Alibrahim said that sectors such as tourism performed much better than expected, that the targets set for 2030 were achieved years in advance, and that the kingdom increased its target to 150 million visitors by the end of the decade.
How about NEOM?
A key pillar of the Vision 2030 program is the creation of NEOM, an urban development project centered around a futuristic, car-free and zero-carbon city called The Line.
The entire NEOM project is estimated to cost $1.5 trillion, and The Line appears to cost around $500 billion, but Saudi Arabia has tried to cut costs in recent years Because the budget deficit grew due to low oil prices.
Alibrahim noted that “agility” and the ability to shift priorities and change plans have become important parts of Vision 2030, adding that “the moment those plans do not address your optimal outcomes is the minute you need to re-plan and adjust.”
This change in priorities has caused the technology, innovation and artificial intelligence sectors to become more important areas of focus.
Abdulelah Albarrak, partner in government and public sector at Oliver Wyman, agrees that Saudi economic plans must respond to technological change.
“Plans need to remain agile and responsive to changes in emerging technologies and new technologies that really drive change. It goes without saying that these massive and mega projects have a significant economic and socio-economic impact on the growth of the country, promotion and development of new sectors, but at the same time the emergence of artificial intelligence and other emerging trends also require a lot of focus,” he said.
People come here ‘to make money’
Alibrahim told CNBC that Saudi Arabia is now seen as a land of opportunity for investors and investments.
“People here have stopped coming to Saudi Arabia to get money, they are coming here to make money,” he said.
“Saudi Arabia is no longer just a source of capital [being] “It’s also a capital city with real economic opportunities,” he added. “We’re just unlocking the potential.”
The Line project construction in Saudi Arabia’s NEOM, October 2024
Giles Pendleton, The Line at NEOM
In September, the Saudi finance ministry predicted in the pre-budget statement He stated that the 2026 budget deficit will be 3.3 percent of GDP and that he is satisfied with this level.
“The government will continue to implement expansionary spending policies that go against the economic cycle and [which are] Addressing national priorities with social and economic impact and contributing to achieving the goals of Saudi Vision 2030 and diversifying the economic base,” the ministry said in a statement.
It also predicts that the economy will grow 4.4% in 2025 and 4.6% in 2026, supported by growth in non-oil activities. On Wednesday, Alibrahim upgraded his 2025 forecast, saying the kingdom’s 2025 real GDP growth will be 5.1%.
Saudi Arabian Finance Minister Mohammed Aljadaan downplayed concerns over Saudi Arabia’s growing debt pile (Although it is a relatively low rate of 32% of GDP) and on.
“The public debt-to-GDP ratio is still relatively low compared to many other economies, is within safe limits relative to the size of the economy, and is supported by fiscal reserves,” the minister said. he said.
— CNBC’s Dan Murphy contributed to this story.
