Click here for recent Market Insight reports on our LONG Saudi Arabia theme →

October 26, 2022

Adding LONG Saudi Arabia

Throughout the past several months, MRP has highlighted the durability of Gulf Cooperation Council (GCC) economies - Saudi Arabia, UAE, Qatar, Bahrain, Kuwait, and Oman. Rising energy prices have bolstered these countries' fiscal surpluses and economic growth. New International Monetary Fund (IMF) data projects Middle Eastern nations will land a $1.3 trillion windfall from extra oil revenues over the next four years

The ongoing energy crisis and sanctioning of global trade has afforded GCC member states significant geopolitical capital as well, helping these nations accrue all of the benefits of higher oil and gas prices without suffering any repercussions that countries like Russia and China are facing.

Saudi Arabia, the largest economy among the Persian Gulf states, is growing particularly quickly, on track for its fastest rate of economic expansion in nearly a decade. The IMF forecasted Saudi Arabia’s GDP to increase by 7.6% this year, among the strongest rates of growth in the world. Per Zawya, Saudi Arabia registered a budget surplus of nearly 78 billion riyals ($21 billion) in the second quarter of 2022, an almost 50% rise from a year earlier.

That has allowed the kingdom to accelerate its economic transformation project, known as Vision 2030. The plan to diversify Saudi industry and markets has been in place since 2016, but the kingdom's particularly strong growth in 2022 is helping it pursue those ambitions more aggressively. Saudi Arabia is currently lining up trillions of dollars of investment in real estate and infrastructure, as well as airlines and supply chains that will facilitate greater movement of labor and capital throughout the country.

Even with this massive spate of developmental projects in the pipeline, the breakeven price of crude oil needed for the Kingdom to balance their budget has fallen significantly, declining from $106.30 to $79.18 between 2014-2022, and now even further to just $69.02 for 2023. That puts Saudi Arabia in a very strong financial position as it embarks on an unprecedented spree of projects that will revolutionize its economy for the future.
 
With all of that in mind, MRP will be adding LONG Saudi Arabia to our list of Active Themes, effective today. To track this theme, we will utilize the iShares MSCI Saudi Arabia ETF (KSA).