Saudi Arabia's economy to grow up to 3.2% in 2021 with PIF investment, finance minister says

Economy offers 'significant opportunities' for the sovereign fund to invest, Al Jadaan says

Saudi Arabia’s economy is expected to grow 3.1 to 3.2 per cent in 2021, according to the country's finance minister. Reuters

Saudi Arabia’s economy is expected to grow 3.1 to 3.2 per cent in 2021 as the country's sovereign wealth fund, the Public Investment Fund, injects billions of dollars into the economy to spur growth, its finance minister said.

“We believe that we are going to end up [in] 2021 even better than these numbers,” Mohammed Al Jadaan told Bloomberg TV. “The PIF is investing locally with a significant amount, recycling part of their investments, allowing private sector participation. So that should have more impact and even better growth in 2021 and beyond.”

Saudi Arabia’s PIF will inject $40 billion on an annual basis in 2021 and 2022 to promote growth in its economy, the kingdom’s Crown Prince Mohammed bin Salman said earlier this month.

The fund manages about $320bn in assets on behalf of the Saudi Arabian government. The crown prince is at the helm of the kingdom's economic transformation known as Vision 2030, which has been pushing for greater diversification of the kingdom's economy to reduce its reliance on hydrocarbons.

The fund is backing several of the kingdom's 'giga-projects' that are key to this diversification, such as the $500bn Neom futuristic city in the north of the country, the Red Sea tourism project covering more than 90 offshore islands and the Qiddiya entertainment city near Riyadh.

“PIF is looking at where is the most optimal investments they will have. There are significant opportunities locally so they are targeting local investments but they are still investing abroad,” Mr Al Jadaan said.

Last month, the International Monetary Fund projected that Saudi Arabia's economy will expand 3.1 per cent in 2021 after contracting 5.4 per cent this year due to the coronavirus pandemic, which has tipped the global economy into the deepest recession since the 1930s.

Saudi Arabia responded “very swiftly” when Covid-19 hit its economy earlier this year, Mr Al Jadaan added.

“We were hit with a dual shock, the pandemic and Covid-19 but also the significant drop in oil prices,” he said. “We responded with very clear discipline and we benefited from the work that we have done over the last four years under Vision 2030 where the government was significantly more responsive, more prepared, more coordinated with focused stimulus packages that have been provided.”

The kingdom has provided “200-plus billion Saudi riyals of stimulus packages to businesses, to households, to small and medium enterprises and that was very effective”, he said.

Mr Al Jadaan said Saudi Arabia has no plans to tap international debt markets again this year as the kingdom leans on domestic borrowing to cover its budget deficit. It borrowed 45bn riyals more than needed from domestic lenders and will use the additional capacity to help plug the rest of the year’s deficit, the finance ministry said last month.

“We went to the local market significantly this year, we are likely to go to the market next year,” he said. “There are no plans currently for an international issuance.”