Saudi Arabia’s economy is set for significant growth in the coming years, driven by government-led initiatives to reduce its dependence on oil. Moody’s Investors Service projects 1.7% growth in 2023, with an acceleration to 4.7% in 2024 and 2025.

“In the Middle East, hydrocarbon-exporting countries are seeking to diversify their economies away from oil. Government-backed projects tied to this aim will drive strong growth in Saudi Arabia next year,” said Moody’s in its latest report. 

The Kingdom’s large-scale “giga-projects,” including the futuristic NEOM city funded by the Public Investment Fund, are expected to sustain growth. Additionally, infrastructure developments for major global events, such as Expo 2030 and the FIFA World Cup in 2034, will create substantial business and lending opportunities.

By comparison, the UAE’s inflation is expected to be higher at 2.3% in 2024 and 2% in 2025, while Egypt’s inflation is projected to hit 27.5% next year and ease to 16% in 2025.

The UAE’s economy is expected to grow by 3.8% in 2024 and 4.8% in 2025, while Egypt’s economic growth is projected to reach 2.4% this year and climb to 4% in 2025.

Moody’s also highlighted strong growth prospects for GCC banks, driven by government initiatives to expand non-oil sectors.

However, the agency cautioned that emerging market banks face challenges such as tighter credit spreads, rising bond issuance, and geopolitical risks. Moody’s noted that profitability may decline as interest rate adjustments on loans outpace those on deposits, which could squeeze net interest margins.

“Geopolitical conflicts and resulting restrictions on cross-border and investment flows are a significant credit risk for EM banks,” Moody’s cautioned, adding that the operating environment will likely remain stable, supported by GDP growth and policy-rate cuts.