Experts say Saudi Arabia will experience incredible economic growth in the coming years. The Boston Consulting Group (BCG) said this will culminate in a $1.3 trillion financial wealth by 2027.
The global management firm estimated the country will see its finances growing by 4.3% per year. It also revealed that Saudi’s real assets will reach SR3.6 trillion or $960 billion in 2027. That’s an impressive jump from its SR2.7 trillion worth of assets in 2022. The country’s deposits and currency reportedly represents its biggest asset class. It made up 48% of the Kingdom’s entire personal wealth last year.
The BCG report also stated that the UAE heads the Gulf Cooperation Council in annual growth. It remains ahead of Saudi Arabia.
A statement from the International Monetary Fund gives credence to the report. The group noted that Saudi Arabia’s fiscal prospects are stable in the near term. Whatever risks the country makes is always balanced. This is due to Saudi Vision 2030. It is the driving force behind the Kingdom’s diversified economy since 2016.
BCG senior partner Natalia Gerashchenko said the Kingdom’s trajectory is amazing. It also indicates incredible possibilities despite the current problems in the world market. She added that they’re expecting steady growth in the next few years. She also said that the key to this growth path lies in a continued focus on diversification.
The BCG also expects bonds to have the fastest growth from 2022 to 2027. The group is forecasting a 7.4% rate within those years. Pensions and life insurance will become the third-biggest class of assets by 2027.
Gerashchenko said the interest in pensions and life insurance mirror a mindset shift. It indicates that people are leaning toward long-term planning and financial stability. It also highlights the country’s asset diversification.
The BCG report indicated that Saudi represents 14.5% of the Middle East’s financial wealth. It also does the same for the North African region. About 100 million or 21% of this wealth comes from people with an ultra-high net worth.
BCG Director Dmitry Angarov said Saudi’s success lies in being able to attract those with high net worth. It’s a testament to the country’s economic power in the region that they’re able to keep these rarefied group of people. Ultra high net worth people make large contributions to economic growth. They also bring a high level of expertise and increased resources.
Not everything is sunshine and roses though. Saudi Arabia’s liabilities are also expected to grow. Finance experts say it will reach $400 billion in 2027. That’s also a huge jump from the $200 billion of 2022.
The report explained the steady growth emphasizes the calculated risks the country's taking. Especially with regards to its economy. This ability will fuel more growth in the upcoming years.
The IMF says Saudi Arabia has enough precautionary reserves. The security of its exchange rate with the US dollar is also serving in the country’s economy in good stead.
Expanding Global Wealth
The BCG’s Global Wealth Report 2023 also hammered in some interesting truths. It stated that global wealth would rebound by about 5% to hit $267 trillion in 2023. This comes after the world faced strong economic headwinds in the previous year.
Global wealth dropped by 4% in 2022. That amounts to around $255 trillion. The culprit was the largest stock market fall the world has seen since 2008. But the previous year's bear market came on the heels of a strong 2021. That period saw global wealth up by over 10% to hit $264 trillion.
Things are looking up this year, with the UAE’s financial wealth forecasted to grow at an annual rate of 5.5%. This means an increase to $1.3 trillion from $1 trillion. This growth is also seen in Saudi Arabia.
There are several factors that contributed to this year's improved wealth outlook. This includes a better macroeconomic prospect and China reopening its economy. The growth in the Middle East is also a big factor, along with the rebounding stock markets.
Markus Massi of BCG said there was a decrease in the world’s financial wealth in 2022. This was then caused by equity markets and geopolitical tensions. The rising interest rates and inflation were culprits as well. But he noted that the GCC’s financial wealth grew by 8% in 2022. The region outperformed the market because of high oil and gas prices. Government-related entities also drove strong initial public offering listings. There was also an influx of high net-worth individuals and new millionaires to the region.
Global financial wealth is now expected to rise. It’s projected to grow at an annual rate of 5.3%. This means it would hit $329 trillion by the time 2027 draws to a close.
This phenomenon is also expected to become controlled by macroeconomic growth. Massi also believes the rise of new millionaires in various countries will be a factor. The improving global wealth will become influenced by the growth of generational money. This refers to inherited wealth that's passed down to the new generation.
Massi also revealed that emerging markets will outclass developed markets. Especially in financial wealth growth. He mentioned several Middle Eastern countries as examples. He said that the UAE’s financial wealth reached $1.2 trillion in 2022. Saudi Arabia came in second with $1.1 trillion. Qatar was third at $302 billion. The growth rates for these countries were favorable due to positive macroeconomic tailwinds. These were also helped by government-sponsored projects and steady oil and gas prices.