According to a recent report by Goldman Sachs, Saudi Arabia plans to invest a staggering $1 trillion in various strategic sectors by 2030 as part of its ambitious plan to diversify its economy away from oil. The U.S.-based investment firm highlighted that this significant investment is part of what it terms a “capex super-cycle,” directing 73% of the funds toward non-oil industries.
This wave of investment will benefit key sectors like clean energy, mining, and logistics, which are expected to see substantial capital inflows over the next several years.
According to the Goldman Sachs analysis, investment in clean energy alone is projected to reach $235 billion, a notable increase from the earlier forecast of $148 billion. This adjustment reflects Saudi Arabia’s intensified efforts to more than double its clean energy targets for 2030.
Faisal Al Azmeh, head of equity research for Central and Eastern Europe, the Middle East, and Africa at Goldman Sachs, commented on the trend, stating: “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.”
Goldman Sachs also reported a reduction in the Kingdom’s potential investments in “upstream” oil and gas projects, now estimated to be between $190 billion and $220 billion, down from the previous range of $230 billion to $260 billion.
In contrast, Saudi Arabia’s progress in renewable energy has accelerated over the past year. As of June 2024, Goldman Sachs Research identified approximately 11 GW of solar photovoltaic capacity in the execution pipeline, with an additional 16.7 GW of solar and wind capacity in the planning stages. The Saudi government has also increased its 2030 solar energy target from 58.7 GW to a range of 100-130 GW.
The report highlights mining as another critical area for increased investment.
Saudi Arabia plans to issue more than 30 mining exploration licenses this year and has launched a significant mineral exploration incentive program, encompassing 182 initiatives, to attract more investment in this sector.
Additionally, the Kingdom is pursuing its ambition to become a global logistics hub and a premier tourism destination. As part of this strategy, Saudi Arabia plans to overhaul its aviation, transport, and logistics sectors.
On the financial front, Goldman Sachs Research expects Saudi Arabia’s budget deficit to widen to 4.3% of GDP this year, up from 2% last year. Higher spending and declining oil revenues primarily drive this increase. The report suggests that while the higher deficit could impact the pace of planned investments, the Capex Super-Cycle will likely remain a central theme in Saudi Arabia’s economic strategy.
“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 $25 billion-per-year funding gap for its capex projects, Saudi Arabia will have to tap alternative sources of financing,” the report concludes.
