Saudi Arabia to Invest $1 Trillion in Capex by 2030 to Drive Non-Oil Economy

KSA, 17 August, 2024 : Saudi Arabia plans to inject $1 trillion into a capital expenditure (capex) super cycle by 2030, with 73% of the funding aimed at expanding the kingdom's non-oil economy, according to Goldman Sachs. This marks a shift from previous estimates, which placed non-oil investments at 66%. However, the report flags a $25 billion annual funding gap for capex projects, with Saudi Arabia exploring alternative financing solutions to address liquidity concerns.

While natural gas remains crucial for the kingdom's decarbonization and diversification goals, investments in upstream oil and gas have decreased to $190-$220 billion from earlier forecasts of $230-$260 billion. Oil sector capex is expected to shrink by $40 billion between 2024 and 2028.

Clean energy is a significant focus, with investment projections rising to $235 billion, driven largely by renewables. The kingdom has also raised its 2030 solar energy target from 58.7 GW to 100-130 GW, reflecting accelerated progress in renewable projects.

Despite these ambitious plans, fiscal pressures are growing. With oil prices hovering around $80-$85 per barrel and production down, Goldman Sachs predicts a budget deficit of 4.3% of GDP in 2024, up from 2% last year. The deficit is largely due to increased spending and lower oil revenues.

To fund Vision 2030, Saudi Arabia has stepped up debt issuance, raising over $35 billion in bonds and sukuk by mid-2024, representing three-quarters of total GCC sovereign issuance. Liquidity issues remain a concern, as loan growth is outpacing deposits in the kingdom's banking sector. Goldman Sachs suggests that deepening equity capital markets and issuing external debt will be key strategies to bridge the funding gap.

Source : www.zawya.com