Saudi Vision 2030 boosts private sector growth, infrastructure project financing: S&P

S&P Global Ratings said Saudi Arabia’s Vision 2030 is creating significant growth opportunities for the private sector and catalyzing financing for infrastructure projects, noting an upswing in securitization activity.

In a recent report, the rating agency said the current phase of vision-linked infrastructure requires large amounts of capital. It expects oil revenues to soften as price assumptions are lowered from 2024—partly offset by higher output—leading to wider fiscal and external deficits.

S&P projects an increase in gross government and banking-system debt and a gradual decline in the government’s net asset position to an average of about 40% of GDP over 2025–2028. Meanwhile, net government asset reserves are expected to remain strong enough to support the sovereign credit profile.

Saudi Arabia retains its role as the world’s key swing oil exporter with low production costs and will remain among the largest producers even after global oil demand peaks, supported by substantial oil and gas reserves.

The government efforts aimed to expand the non-oil economy has reduced related cyclical and external volatility and is delivering tangible results.

Non-oil activity is expected to contribute around 57% of GDP in 2025, with the share rising when oil prices fall and easing when they rise, S&P said.

S&P added the fiscal strategy emphasizes spending discipline, including periodic rationalization or reprioritization of projects if needed. Interest costs are expected to remain below 5% of general government revenue during 2025–2028.

The current account is expected to stay in deficit for an extended period, widening to about 2.6% of GDP in 2025–2028 after the surpluses recorded in 2021–2023, mainly due to softer oil export receipts and higher project-related imports.

On global oil markets, S&P expects supply additions and slower demand growth. Saudi oil and gas exports are not directly affected by US tariffs, but changes in regulations, taxation or sanctions—and weaker global activity—could weigh on demand. Global oil demand is projected to grow in 2025–2026, but by less than the 1.1 million barrels per day (bpd) increase seen in 2024.

Additionally, loan growth has outpaced deposit accumulation, shifting funding structures. S&P expects Saudi banks’ external debt to rise over the next 12–24 months but remain below 10% of total loans.

The Saudi banks’ capital remains strong. Residential mortgage lending is expected to increase, insurance continues to expand, and consolidation among smaller players should strengthen the sector’s resilience.

Bank profitability is solid, with a return on assets (ROA) around 2.3% as of June 30, 2025, and likely to hold broadly steady as higher lending volumes offset lower rates.

Dividend payouts are expected to stay relatively conservative at about 50%, supporting capital.

Housing remains a priority as the Kingdom targets 70% homeownership.

S&P expects residential prices to keep rising over the next two to three years due to tight supply in major cities and sustained demand from a growing young workforce, alongside regulatory changes allowing foreign ownership.

As of March 31, 2025, retail mortgages accounted for 22.5% of total bank loans.