Saudi markets face uncertainty and vulnerability due to global oil price declines, with cautious economic outlook.

From Investing.com: 2024-12-22 05:30:00

Saudi Arabia’s financial markets face uncertainty amid fears of an “oil winter.” Despite efforts to diversify under Vision 2030, the economy remains vulnerable to global oil price declines. Real domestic demand grew by 4.4% last year, but overall GDP growth has slipped into negative territory as oil export revenues decline.

Infrastructure investments and borrowing have sustained consumption and business activity. However, Saudi stocks are at risk if crude oil prices weaken further. Global crude demand is expected to remain subdued in 2025, impacting oil prices. Saudi Arabia’s cautious production stance may continue to challenge oil revenues.

The proposed 2025 budget includes significant spending cuts to curb rising public debt, potentially stifling economic activity. High borrowing costs, tied to U.S. interest rates, limit private-sector credit growth. Public debt has increased significantly, now representing 28% of GDP, with weak oil revenues and Vision 2030 expenses continuing to strain finances.

Investors are advised to maintain a neutral stance on Saudi equities due to market challenges. Saudi sovereign credit has been downgraded due to rising debt levels and widening credit spreads relative to emerging market peers. The economic outlook remains cautious, with challenges expected to persist in the near future.



Read more at Investing.com: Can Saudi markets weather an oil winter? By Investing.com