Saudi Arabia faces the most precarious moment yet of its economic reinvention.
Eight years after now-Crown Prince Mohammed bin Salman unveiled Vision 2030, his blueprint for a life after oil, delays and scalebacks with the multitrillion dollar makeover are laying bare the pressure on the kingdom’s finances.
With the budget in deficit for six straight quarters, Saudi Arabia has become the biggest issuer of international debt in emerging markets. And its decision to cut oil production with other OPEC+ members in 2023 has failed to raise export revenues substantially.
Here is a look at the key stress points.
The Gulf country’s oil earnings have dropped around one-third from 2022 levels, when Brent crude averaged nearly $100 a barrel thanks to Russia’s invasion of Ukraine. That’s weighing on the kingdom’s overall economic stability as it keeps spending on Prince Mohammed’s huge projects, which include everything from the new city of Neom to tourist resorts, football leagues and AI investments.
“The vision is facing a test of reality and there are adjustments being taken,” said Jean-Michel Saliba, Bank of America Corp.’s Middle East and North Africa economist. “It is a sign of maturity. I don’t think it’s a sign that the vision is being derailed.”
Goldman Sachs Group Inc. found that Saudi Arabia’s sovereign-risk score — a measure that takes into account financial and governance metrics — worsened the most after Israel among emerging markets during the first half of the year. A ranking by Morgan Stanley in June reached a similar conclusion, with the kingdom among “key laggards.”
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