Saudi Arabia’s economy and merger and acquisition (M&A) market are expected to rebound in 2024, after a challenging year in 2023 that saw a sharp decline in gross domestic product (GDP) and deal activity. The Kingdom is projected to achieve a growth rate of more than 4% in 2024, driven by the recovery of oil production and the continued diversification of the economy away from hydrocarbons. The M&A market is also expected to see an increase in deal value and volume, as investors seek opportunities in key sectors such as mining, energy, technology, gaming and esports, and infrastructure.
The Kingdom’s economic and M&A outlook for 2024 is based on the latest projections and reports from the International Monetary Fund (IMF), the Saudi Ministry of Finance (MoF), and the global law firm Greenberg Traurig, LLP, which published a comprehensive analysis of the Kingdom’s economic and M&A trends for 2024.
The Kingdom faces economic headwinds in 2023 due to global and regional factors
The Kingdom’s economy and M&A market faced significant headwinds in 2023, due to a combination of global and regional factors that affected its output and performance. According to the IMF, the Kingdom’s GDP is expected to grow by only 0.8% in 2023, down from 8.7% in 2022. The MoF is even less optimistic, forecasting a negligible growth of 0.03% in 2023.
The main reason for the economic slowdown in 2023 was the decline in oil production, which offset the gains from the non-oil economic activity. The Kingdom reduced its oil output in response to the global oversupply and the low demand caused by the COVID-19 pandemic and the subsequent lockdowns and travel restrictions. The Kingdom also faced geopolitical tensions in the Middle East, especially in Yemen and Iran, which disrupted the shipping and trade routes in the Red Sea and the Persian Gulf.
The M&A market in the Kingdom also suffered a setback in 2023, as the number and value of deals decreased compared to 2022. According to Greenberg Traurig, the total value of M&A deals in the Kingdom in 2023 was $12.4 billion, down from $18.7 billion in 2022. The number of deals also dropped from 67 in 2022 to 44 in 2023. The decline in M&A activity was mainly due to the uncertainty and volatility in the global and regional markets, as well as the regulatory and legal challenges that faced some of the potential deals.
The Kingdom pursues its Vision 2030 objectives and invests in key sectors
Despite the economic and M&A challenges in 2023, the Kingdom continued to pursue its Vision 2030 objectives, which aim to diversify the economy away from its reliance on oil revenues and to transform the Kingdom into a global hub for trade, investment, and innovation. The Kingdom has made significant progress in reducing the contribution of hydrocarbons to its GDP, from 45% in 2012 to 40% in 2022. The Kingdom has also improved its ranking in the World Bank’s Ease of Doing Business Index, from 92nd in 2019 to 62nd in 2023.
The Kingdom’s diversification efforts are supported by the National Investment Strategy (NIS) and the Public Investment Fund (PIF), which have invested heavily in a range of sectors and industries, both domestically and internationally. The NIS is a comprehensive plan that aims to attract foreign direct investment (FDI) and to create jobs and opportunities for the Saudi citizens. The PIF is the Kingdom’s sovereign wealth fund, which manages over $400 billion in assets and has a target of $1 trillion by 2025.
Some of the key sectors that the NIS and the PIF have focused on in 2023 include:
- Mining: The Kingdom has vast mineral resources, such as gold, copper, phosphate, and uranium, which it plans to exploit and develop as part of its Vision 2030. The Kingdom has allocated $3.6 billion for the mining sector in its 2023 budget, and has launched several initiatives and projects to attract investment and to enhance the sector’s competitiveness and sustainability.
- Energy: The Kingdom is a global leader in the energy sector, not only in oil and gas, but also in renewable and clean energy. The Kingdom has set ambitious targets to increase the share of renewable energy in its power generation mix, from 0.2% in 2019 to 27.3% by 2024. The Kingdom has also invested in hydrogen production and carbon capture and storage technologies, as well as in nuclear energy for peaceful purposes.
- Technology: The Kingdom is keen to embrace the digital transformation and to foster a culture of innovation and entrepreneurship. The Kingdom has launched several initiatives and programs to support the development of the technology sector, such as the National Digital Transformation Strategy, the National Data Management Office, and the Saudi Venture Capital Company. The Kingdom has also invested in emerging technologies, such as artificial intelligence, biotechnology, and cybersecurity.
- Gaming and esports: The Kingdom has recognized the potential and the popularity of the gaming and esports industry, especially among the young and tech-savvy population. The Kingdom has established the Saudi Esports Federation and the Saudi Arabian Federation for Electronic and Intellectual Sports, which organize and regulate the gaming and esports activities and events in the Kingdom. The Kingdom has also invested in gaming and esports companies and platforms, such as SNK Corporation, Roblox, and Activision Blizzard.
- Infrastructure: The Kingdom has embarked on a massive infrastructure development program, which aims to improve the quality and efficiency of the transport, logistics, and utilities sectors. The Kingdom has allocated $49.3 billion for the infrastructure sector in its 2023 budget, and has launched several mega-projects, such as the Riyadh Metro, the Red Sea Project, and NEOM.
The Kingdom anticipates a positive economic and M&A outlook for 2024
The Kingdom expects to recover from the slump in 2023 with a robust economic and M&A performance in 2024. The IMF projects that the Kingdom’s GDP will grow by 4.2% in 2024, while the MoF forecasts a growth of 4.4%. The growth will be driven by the recovery of oil production and prices, as well as the continued expansion of the non-oil economic activity. The Kingdom also expects to benefit from the hosting of several major events in 2024, such as the G20 Summit, the Formula 1 Grand Prix, and the FIFA World Cup.
The M&A market in the Kingdom is also expected to rebound in 2024, as investors seek opportunities in the key sectors that the Kingdom has invested in and developed. Greenberg Traurig predicts that the total value of M&A deals in the Kingdom in 2024 will reach $15.6 billion, up from $12.4 billion in 2023. The number of deals is also expected to increase from 44 in 2023 to 56 in 2024. The M&A market will be driven by the increased appetite and confidence of both domestic and foreign investors, as well as the improved regulatory and legal environment in the Kingdom.
The Kingdom’s economic and M&A outlook for 2024 is optimistic and promising, reflecting the Kingdom’s resilience and vision in the face of the global and regional challenges. The Kingdom is determined to achieve its Vision 2030 objectives and to become a leading and diversified economy in the world.
