S&P Global Ratings revised Saudi Arabia’s forecast to positive from stable on Friday, citing strong non-oil growth outlook and economic resilience.

The ratings agency said the positive outlook reflects the Saudi government’s potential to bring in more reforms and investments, contributing to the development of non-oil economy.

The upgrade also reflects the country’s economic resilience against ongoing volatility stemming from the hydrocarbon sector.

“We expect to see an acceleration of investments to develop newer industries, such as tourism, and diversify the economy away from its primary reliance on the upstream hydrocarbon sector,” S&P said.

Saudi Arabia, the world’s top oil exporter, had announced an economic overhaul, known as Vision 2030, to end its reliance on oil for further economic growth.

S&P says continued execution of Vision 2030 initiatives will support strong non-oil growth over the medium term.

However, the hydrocarbon sector and national oil company Aramco will continue to play an important role in driving oil-linked economy to the kingdom.

Inflation has remained relatively low in Saudi Arabia compared to global levels. S&P expects inflation to remain steady and that interest rates will broadly move in tandem with the US Federal Reserve rates.

S&P also affirmed Saudi Arabia’s ratings at “A/A-1.”

Saudi Arabia’s non-oil activities expanded 4.9 per cent year-on-year in the second quarter of 2024, driven by gains in the financial and insurance sectors, official data showed recently.

According to data from the General Authority for Statistics (GASTAT), and published by Arab News, the financial, insurance, and business services sectors surged 7.1 per cent in the second quarter compared to the same period last year.

Non-oil activity also rose 2.1 per cent compared to the previous quarter, reflecting the Kingdom’s efforts to broaden its economic base.

The non-oil sector’s growth aligns with Saudi Arabia’s Vision 2030, a strategic plan aimed at reducing the country’s reliance on oil revenues.

The report further revealed that Saudi Arabia’s seasonally adjusted gross domestic product increased by 1.4 per cent in the second quarter compared to the first.

However, GDP saw a slight year-on-year decline of 0.3 per cent in the same period, largely due to an 8.9 per cent drop in oil activities following the Kingdom’s decision to cut crude output in line with OPEC+ agreements.

To stabilize the market, Saudi Arabia reduced oil production by 500,000 barrels per day in April 2023, a cut that has been extended until December 2024.

GASTAT also noted that the Kingdom’s GDP at current prices reached SR1.02 trillion ($270 billion) in the second quarter.

“Crude oil and natural gas activities achieved the highest contribution to the GDP at 23.2 per cent, followed by government activities at 16 per cent, and wholesale and retail trade, restaurants, and hotels activities with a contribution of 10.1 per cent,” stated GASTAT.

Government activities increased by 3.6 per cent year-on-year and by 2.3 per cent quarter-on-quarter.

Meanwhile, electricity, gas, and water activities saw an 8.9 per cent rise year-on-year, while wholesale and retail trade, restaurants, and hotels grew by 6.8 per cent.

The report also highlighted that government final consumption expenditure rose by 10.9 per cent year on year and 4.3 per cent quarter on quarter.

In the second quarter, gross fixed capital formation increased by 3.2 per cent compared to the same period last year. With continued investments in key sectors such as financial services, infrastructure, and energy, Saudi Arabia remains focused on achieving the goals set out in its Vision 2030 blueprint. Earlier, Saudi Arabia’s non-oil exports increased by 10.5 per cent during the second quarter of 2024, compared to the second quarter of 2023, the General Authority for Statistics (GAS) announced.

The International Trade Bulletin for the second quarter of 2024, according to the Saudi Press Agency (SPA), showed that national non-oil exports increased by 1.4 per cent, excluding re-exports, and the value of re-exported goods increased by 39.1 per cent during the same period.

The results of the bulletin showed that the value of non-petroleum exports including re-exports increased by 4.3 percent, while commodity exports in the second quarter of 2024 decreased by 0.2 percent compared to the second quarter of 2023, and the value of imports decreased by 5.6 per cent, due to a decrease in petroleum exports by 3.3 percent.

The proportion of petroleum exports in total exports in the second quarter of 2024 decreased to 75 per cent compared to 77.4 percent in the same quarter of last year.