Digital representation of the NEOM project The Line in Saudi Arabia
The line, NEOM
When Saudi Arabia first announced plans to reinvent its oil-based economy, massive infrastructure projects such as the futuristic NEOM region and The Line smart city were touted as central to the transformation.
But almost a decade after the launch of the Vision 2030 transformation strategy, Riyadh’s priorities have changed with the times.
Now technology and artificial intelligence are a top priority for the kingdom.
“We are shifting priorities a little bit to sectors that need it most, and today it is technology, artificial intelligence,” Faisal Alibrahim, Saudi Arabia’s economy minister, told CNBC on Wednesday.
“We want to get to an economic structure that is productivity-oriented and has technology, innovation and generative AI at its core,” he told CNBC’s Dan Murphy on the sidelines of the Future Investment Initiative (FII) in Riyadh.
Riyadh’s Vision 2030 strategy to diversify its economy away from oil has seen the country invest heavily in tourism, cultural and sporting events, technology and infrastructure.
“Our primary objective is non-oil growth, and non-oil growth has been steadily increasing. This is our main driver of economic growth,” Alibrahim said, pointing out that non-oil activities now account for 56% of total real GDP in Saudi Arabia.
“All our transformation efforts are aimed at achieving growth outside the oil sector, so that we can diversify our economy, instead of having to rely on a single commodity price and the size of the state budget, but also rely on the dynamics of the private sector and be ready for the future.”
Alibrahim said sectors such as tourism had performed far better than expected and targets set for 2030 were achieved years in advance, prompting the kingdom to increase its target to 150 million visitors by the end of the decade, he said.
What about NEOM?
A key pillar of the Vision 2030 program is the creation of NEOM, an urban development project with a futuristic, car-free and zero-carbon city called The Line at its heart.
The entire NEOM project is estimated to cost $1.5 trillion, with The Line expected to cost about $500 billion, but Saudi Arabia has sought to cut costs in recent years as its budget deficit has grown amid lower oil prices.
Alibrahim said “agility” and the ability to shift priorities and change plans have become key components of Vision 2030, noting that “the moment those plans do not produce your optimal results is the moment you need to replan and adapt.”
This shift in priorities has resulted in the areas of technology, innovation and artificial intelligence becoming more important areas of focus.
Abdulelah Albarrak, government and public institutions partner at Oliver Wyman, agreed that Saudi Arabia’s economic plans must respond to technological change.
“Plans must remain agile and responsive to changes in evolving technologies, emerging technologies that really dictate change. It goes without saying that these giga and mega projects have significant economic and socio-economic impact on the country’s growth, driving and cultivating new sectors, but also the emergence of AI and other emerging trends require a lot of focus,” he said.
People come here “to make money”
Alibrahim told CNBC that Saudi Arabia is now seen as a land of opportunity for investors and investments.
“People here no longer come to Saudi Arabia to get money, they come here to make money,” he said.
“Saudi is no longer just a source of capital [being] also a capital of real economic opportunity,” he added. “We’re just unlocking the potential.”
Construction work for The Line project in NEOM, Saudi Arabia, October 2024
Giles Pendleton, The Line at NEOM
In September, the Saudi Finance Ministry estimated in a pre-budget statement that the budget deficit for 2026 would be 3.3% of GDP and was satisfied with this level.
“The government will continue to pursue expansionary spending policies that run counter to the economic cycle and.” [which are] “Aimed at national priorities with social and economic impacts and in a way that contributes to achieving the goals of Saudi Vision 2030 and diversifying the economic base,” the ministry said in a statement.
It also predicted the economy would grow by 4.4% in 2025, supported by growth in non-oil activities, and by 4.6% in 2026. On Wednesday, Alibrahim raised the 2025 forecast, stating that the kingdom’s real GDP growth in 2025 will be 5.1%.
Saudi Arabia’s Finance Minister Mohammed Aljadaan has played down concerns about Saudi Arabia’s growing debt pile (albeit relatively low at 32% of GDP) and deficit.
“The public debt to GDP ratio is still at relatively low levels compared to many other economies and is within safe limits compared to the size of the economy and is supported by financial reserves,” the minister said.
—CNBC’s Dan Murphy contributed to this story.
Comments are closed, but trackbacks and pingbacks are open.