RIYADH: Saudi Arabia’s non-hydrocarbon real gross domestic product is set to grow between 5 and 5.5 percent from 2025 to 2027, driven by increased government spending, a new analysis showed. In its latest report, US-based credit rating agency Moody’s stated that this growth marks an improvement from the 4.6 percent growth recorded in 2022-2023 and the modest 1.5 percent seen between 2017 and 2019. The Kingdom’s efforts to strengthen its non-oil sector align with the strategic objectives of Vision 2030, which aims to diversify the economy and decrease reliance on crude oil revenues. Moody’s emphasized that sustained government spending will be essential to support economic diversification initiatives. “While we expect non-hydrocarbon economic activity to remain robust, downside risks to oil prices and production levels will amplify the trade-off between implementing diversification projects and maintaining a robust fiscal position and sovereign balance sheet,” Moody’s noted in the report. The recent pre-budget statement from Saudi Arabia, issued on Sept. 30, underscores the focus on advancing economic diversification and social programs, particularly under Vision 2030 and various giga-projects. Government spending is projected to stay high at around 30 to 32 percent of GDP during 2025-2027, consistent with recent trends. “The relatively high level of spending, which will likely have an increased allocation to capital expenditure, will support non-hydrocarbon economic growth and the gradual reduction of the kingdom’s exposure to long-term global carbon transition,” added the rating agency. Moody’s emphasized the crucial role of Saudi Arabia’s Public Investment Fund in the Kingdom’s economic diversification efforts, noting that the fund could mitigate economic challenges during periods of lower oil prices. “The PIF’s role may reduce some of the implementation risks to economic diversification in the event of lower oil prices and production. Continued robust growth in non-hydrocarbon private-sector activity would also provide momentum to the diversification efforts,” concluded the report. In a separate analysis, S&P Global recently projected Saudi Arabia’s GDP growth at 1.4 percent for this year, with an acceleration to 5.3 percent anticipated in 2025. According to the analysis, this growth is expected to be bolstered by the Kingdom’s diversification strategy, which focuses on enhancing the non-oil private sector and reducing reliance on crude oil revenues. The report also noted that potential US Federal Reserve rate cuts could benefit emerging markets like Saudi Arabia, enhancing growth fundamentals and attracting greater capital inflows.