A third of middle-market businesses in Saudi Arabia expect growth in excess of 10 per cent this year, according to a survey by consultancy EY.
Businesses in the kingdom, the Arab world’s largest economy, are more optimistic about revenue growth and business opportunities than last year, according to the EY Growth Barometer, an annual survey of growth strategies among entrepreneurs and middle-market leaders. The Vision 2030 reforms set by Crown Prince Mohammed bin Salman look to increase private sector participation and are spurring optimism among business leaders, according to the survey.
Saudi Arabia is pressing ahead with its economic reform agenda with an emphasis on developing the country’s non-oil sector. Riyadh is encouraging foreign investors to help the kingdom build local industries and invest in projects such as the $500 billion Neom, a futurist mega-city scheme launched by the crown prince last year. Among the reforms the kingdom has already implemented as part of its Vision 2030 economic transformation strategy are the introduction of a 5 per cent VAT rate in January, far-reaching reforms to its capital markets and the enactment of new bankruptcy legislation last month to support corporate financial restructuring.
Regulation emerged as a new force in stimulating innovation and revenue growth. More than one third (35 per cent) of Saudi Arabian respondents consider regulation to be the top driver of innovation, up 28 percentage points compared to last year.
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“Contrary to the common belief that regulation stifles growth and innovation, Saudi executives believe that reforms set by the crown prince have been driving change and growth in the kingdom,” said Fahad Altoaimi, EY’s managing partner for Saudi Arabia.
While executives remain confident about growth, they report insufficient cash flow as the biggest challenge to expansion this year. About a third of Saudi companies surveyed currently rely on bank finance for funding.
More business leaders are looking to raise capital through capital markets, with about 73 per cent of executives considering an initial public offering. The kingdom’s Tadawul market is the largest stock exchange in the Arab world with a market capitalisation of more than $500 billion.
Raising funds is crucial to the expansion of businesses, as the survey found 29 per cent of respondents expressing an interest in widening their international reach. Some 58 per cent of respondents are looking to recruit more full-time staff.