Saudi Arabia will invest $1tn in strategic sectors by 2030 as it looks to diversify its economy away from oil, according to a Goldman Sachs study.
Clean energy, mining and logistics will be major sources of investment for the rest of the decade.
Saudi investment plans
According to the Goldman Sachs report, clean energy spending will reach $235bn, more than the previously forecast $148bn, as Saudi Arabia looks to more than double 2030 targets.
Faisal Al Azmeh, head of equity research for Central and Eastern Europe, the Middle East and Africa at Goldman Sachs, said: “Under a directive from Saudi Arabia’s energy ministry, capex in the oil sector is likely to shrink by $40 billion between 2024 and 2028.
“However, natural gas continues to be “a key contributor to the country’s decarbonization, economic development, and diversification plans”.
He estimate Saudi Arabia’s potential investments in “upstream” oil and gas has shrunk to $190-220bn from the previous range of $230-260bn.
Over the past year, on the other hand, the government’s progress in renewable energy has quickened. As of June 2024, Goldman Sachs Research identified around 11 GW of solar photovoltaic capacity in the execution pipeline, in addition to 16.7GW in solar / wind capacity in planning stages.
The Saudi government has raised its solar energy target for 2030 from 58.7 GW to 100-130 GW.
The Goldman Sachs report identifies mining as a major area for increased investment inSaudi Arabia.
The Kingdom is planning to hand out more than 30 mining exploration licences this year, and has established a major 182 mineral exploration incentive program to encourage more investment in the sector.
The Kingdom aims to become a global logistics hub and tourism hotspot. Meanwhile there are plans to overhaul the aviation, transport and logistics sectors.
On funding plans for major investments, Goldman Sachs Research said: “The country’s budget deficit will widen to 4.3 per cent of GDP this year, up from 2 per cent last year. Around 2.6 percentage points of the deficit is the result of increased spending, with the rest driven by lower oil revenues.
“It’s uncertain how a higher deficit will affect the pace of planned investments. But we think the Capex Super-Cycle will likely remain an important theme in Saudi Arabia for the foreseeable future.
“Finding the money to invest in the super-cycle will bring its own challenges. Saudi Arabia has traditionally relied on bank loans to support growth.
“The latest Saudi banking system data for May 2024 shows that the liquidity situation in the country remains tight, with loan growth outpacing deposits. To bridge an estimated $25bn-per-year funding gap for its capex projects, Saudi Arabia will have to tap alternative sources of financing”.