In a significant economic update, Saudi Arabia’s attempts to attract foreign direct investment (FDI) faced a downturn in the third quarter of 2024. The Kingdom reported a decrease in FDI inflows, falling to $4.8 billion, down 8% quarter-on-quarter through September, as per data from the Saudi General Authority for Statistics.

This downturn puts Saudi Arabia in a precarious position as it strives to meet an ambitious annual target of $29 billion in FDI for 2024. The Kingdom will now require one of its largest quarterly FDI inflows ever to achieve this goal by year-end.

Saudi Arabia has ambitious plans to increase its FDI to $100 billion by 2030, aiming to relieve the financial demands of its economic diversification efforts. This strategy includes harnessing foreign expertise to boost local industries such as technology and minerals exploration, crucial for the Kingdom’s growth and development.

Despite the downturn, Saudi investment officials remain optimistic. In October, Khalid Al-Falih, the Saudi Investment Minister, highlighted positive trends in the data, indicating potential improvements in the coming months. Significant announcements from international firms like Goldman Sachs Group Inc. and Z Capital Group during the Future Investment Initiative in Riyadh suggest forthcoming FDI boosts.

However, Saudi Arabia continues to grapple with economic pressures from subdued oil prices and high expenditure, which have enforced constraints on the nation’s budget. The Kingdom reported its first current account deficit since 2021 and is adjusting to a fiscal deficit projected at about 2.8% of GDP for this year.

Moreover, the global decline in oil prices has necessitated adjustments in Saudi’s economic strategies. With Brent crude trading around $74 a barrel, the Kingdom requires a price of $93 to balance its budget, a challenge compounded by necessary domestic investments by its sovereign wealth fund, which raise the break-even oil price to $108 per barrel.

The fourth quarter presents a crucial test for Saudi Arabia as it seeks to enhance its FDI inflows to fund its Vision 2030 objectives, amid ongoing geopolitical and economic challenges.

Stay tuned for further updates as we monitor these critical developments shaping the global economy.