Saudi Arabia's booming and it isn't only about oil this time

A social and economic shift is reshaping the kingdom, accelerated by government programmes. PHOTO: NYTIMES

RIYADH (BLOOMBERG) - The more than 300 apartments in Almajdiah Residence's new Riyadh complex sold in just a month for cash, without the company even having to advertise.

This is Saudi Arabia, the world's biggest exporter of oil, so it is no surprise that the property market is red-hot as income from a spike in energy prices flows through the economy.

But Almajdiah's chief executive officer, Mr Abdulsalam Almajed, said the scramble for the 1 million riyal (S$370,700) homes reflects something else too: the social and economic shift that is reshaping the kingdom, accelerated by the Crown Prince's overhaul programme.

"There is a change in mindset," said Mr Almajed, who heads the family owned developer, as some Saudis embrace the more open style of living that his firm caters to.

"Today there is beautiful creativity in Saudi designs," he added.

While Saudi de facto ruler, Crown Prince Mohammed bin Salman, has centralised power and increased political repression since being elevated by his father, King Salman, in 2015, he has also ended or relaxed restrictions on entertainment and how men and women can mix, and is trying to curb a reliance on oil.

Ten years ago, many property owners would not even rent to women, who needed approval of a male guardian for many life decisions. Today, women are entering the labour market in greater numbers, and 30 per cent of Almajdiah's buyers are female, acquiring investment properties or a home of their own.

They are helping to lift an economy transformed by energy markets. As much of the world is fretting about spiralling inflation fueled by Russia's war in Ukraine and potential recessions, oil averaging more than US$100 a barrel this year means that Saudi Arabia's economy is the fastest-growing in the Group of 20.

Gross domestic product expanded 11.8 per cent in the second quarter, when the non-oil economy grew 5.4 per cent and is now larger than at the end of 2019, before the pandemic struck.

State energy company Saudi Aramco has reported the biggest quarterly adjusted profit of any listed company globally. Billions of dollars are flowing into Saudi coffers and raising state investments, boosting sentiment in a private sector reliant on government contracts.

Capital spending jumped an annual 64 per cent in April to June, as the kingdom embarks on a building spree including malls and parks as well as grandiose plans for a new city built from scratch and a luxury tourism development on the Red Sea. Overall spending was 16 per cent higher, even though this year's initial budget forecast that it would fall.

Summers typically send Saudi elites off to cooler climes in Europe, but Riyadh's newest high-end restaurants are packed. At Coya, a Latin American chain, the most popular dinner seating - 8.30pm to 9pm - is fully booked a month ahead.

Combined cash withdrawals and point-of-sale transactions, indicators of consumer activity, have bounced back, increasing an annual 9 per cent in June after a record high in March. Inflation last month was 2.7 per cent, about a third of the rate in the United States or the euro zone.

The Finance Ministry is trying to break the habit of oil-tracking splurges and cutbacks, flowing stimulus through sovereign funds and into long-term projects like electric-vehicle manufacturing and tourism.

The economy is expected to expand 7.6 per cent this year but growth could fall back to 2.5 per cent by 2024, according to a Bloomberg survey of economists. Crude is now around $90 a barrel as global fears over economic downturns and the potential for more supply from Iran if its nuclear deal is resurrected continue to hang over the market.

"If there is another collapse in oil prices, there will again be slowing down in activity," said chief economist Monica Malik at Abu Dhabi Commercial Bank. "But a number of positive factors are coming together at this point."

Join ST's Telegram channel and get the latest breaking news delivered to you.