Here’s the roadmap for 8 sectors under Vision 2030

Two years after the launch of Saudi Arabia’s ambitious Vision 2030 program, sectoral gains have been “impressive” and are expected to be substantial over the long-term, Japan’s MUFG said in a recent report.

Unveiled in 2016, Vision 2030’s key directive is to increase non-oil government revenues from SAR163 billion ($43 billion) to SAR 1 trillion ($267 billion) by 2030.

Below is MUFG’s outlook for eight key sectors outlined under the program:

1) Banking. Saudi banks’ loan growth is set to recover marginally in 2018 backed by improvements in public sector spending. However, private sector corporate demand may lag, as business confidence is yet to fully recover. In the retail segment, long-term prospects look appealing due to greater inclusion of women in the workforce and relaxed mortgage underwriting standards.

2) Consumer. Despite the near-term headwinds from expats leaving Saudi Arabia in large numbers,  MUFG’s medium-term outlook for Saudi consumer companies is robust, with Saudization boosting consumption, more individuals entering the workforce, and retailers benefitting from potential changes in consumption patterns due to women being able to drive and work

3) Construction. Within the construction sector there is much to look forward to, given that SAR 54 billion has been allocated to the Infrastructure and Transportation sector in the 2018 budget, which is 86 percent higher than budgeted in 2017. “We believe the majority of this spend is towards low-cost housing and roads, which will be the government’s focus,” MUFG said. However, as cash spending remains significantly above new orders, this indicates there is still pain to be endured by contractors before they see the uptick from government spending.

4) Real estate. Average property prices have declined in major Saudi cities, a welcome sign for Saudi government efforts to raise home ownership. The government continues to introduce various residential stimulus packages to encourage further property development, such as licensing developers to enable off-plan sales and increasing the loan-to-value ratio for first-time home ownership.

5) Healthcare. Robust growth is expected in the healthcare sector on the back of increased enforcement for Saudis, government targets for higher insurance penetration, and the impact of Saudization. Growth will also be driven by higher patient volumes to private hospitals as they add capacity and as the number of insured people rises in the country through mandatory health insurance.

6) Telecommunications. Telecom operators last year had to adapt to a tough macroeconomic environment with expatriates leaving, in addition to more consumer-friendly regulation. According to the report, all three telecom operators will face challenges to monetize data effectively in light of pro-consumer regulatory announcements.

7) Utilities. As part of the push for economic diversification, the Saudi government is looking to privatize several state-owned assets in utilities and other sectors, with plans to generate SAR 35-40 billion ($9-11 billion) by 2020 through assets sales. Privatization and liberalization of the utilities market, specifically for tariffs, is expected to boost value for the sector over the long-term.

8) Petrochemicals. Over the past two years, earnings have remained sluggish for the Saudi chemicals sector, as low oil prices and cost increases weighed on performance. However, 2018 should mark a return to earnings growth driven by higher average oil prices, the report said.