Stock market today: S&P 500 hits fresh record close on stronger economic growth
Investing.com -- With just five years to go, Saudi Arabia’s Vision 2030 reform program has delivered major strides in social reforms but continues to fall short on some of its core economic targets, according to Capital Economics.
The consultancy highlighted that labor market indicators have surpassed expectations. Unemployment among Saudi nationals fell to 6.3% in the first quarter, already below the original 7% target for 2030, prompting authorities to set a new goal of 5%.
Female participation in the workforce reached 36.3%, beating the 30% benchmark and now revised higher to 40%.
Home ownership also climbed to 63.4%, placing the Kingdom on track to meet the 70% target, although affordability is being strained by rising property prices.
Tourism has continued to expand, with 116 million visitors recorded in 2024 versus 109 million a year earlier.
Capital Economics noted this keeps the sector on course for the 150 million target, though most arrivals remain domestic or religious in nature.
“Of last year’s arrivals, only 25% were from outside of Saudi Arabia and of those, fewer than 60% visited for non-religious purposes,” the firm said in a Wednesday report.
“These shares have changed little in recent years, highlighting the Kingdom’s struggle to market itself as a leisure tourism destination to rival the likes of Dubai or Bahrain.”
Meanwhile, fiscal diversification has proven more challenging. Non-oil revenues exceeded SAR500 billion in 2024, but “it still needs to nearly double again in the next five years to meet the Vision target,” Capital Economics said.
Export diversification also lags, with non-oil exports reaching 16.7% of non-oil GDP in the first quarter, well short of the 50% target.
“Meeting the Vision 2030 target (50%) seems a stretch too far though even if the target is revised down following the rebase and revisions to GDP made earlier this year (which lifted the estimate of nominal GDP),” the report states.
Notably, foreign direct investment (FDI) remains a key weak point. Despite reforms such as a new Civil Code and overhauled Investment Law, inflows stood at only 1.8% of GDP on a four-quarter sum basis in Q1, compared with the 5.7% target.
The firm said the impact of recent changes “will take time to be felt.”
There are already signs that the government is shifting course, Capital Economics continued. Q2 budget data showed capital expenditure fell by nearly a third year-on-year, while the Public Investment Fund’s gigaproject portfolio was written down by SAR30 billion ($8 billion).
Capital Economics suggested that reallocating resources to areas like education, the labor market, and business environment “would probably do more to further economic diversification efforts and boost long-term growth prospects than gigaprojects.”