Japan’s MUFG predicts 2021 economic recovery for Saudi Arabia

  • Feb 23, 2021
  • Arab News

MUFG, a global financial services group and one of the largest banking institutions in Japan, anticipates a fast and robust economic recovery for Saudi Arabia in 2021, with GDP growth forecasted to rise from -4.8 percent to 3.6 percent, and a combination of a further pick-up in crude oil production as well as a rebound in non-oil sector momentum.

“The energy, vigor and momentum for boosting growth over the long term, supported by the structural transformation economy, while also enhancing the ease of doing business and improving productivity will create further opportunities for Japanese and other corporations in the Kingdom,” said Hiroaki Fujisawa, head of MUFG’s Riyadh branch.

MUFG opened a branch in the Saudi capital in October 2018, becoming the first Japanese financial institution in the Kingdom to offer full banking services for corporate clients. These include deposits, foreign exchange and settlements. As a trusted partner with a footprint in the region that goes back to more than 100 years, MUFG has been expanding its capabilities in the Middle East to cater to the increased demand from corporate clients, establishing itself as a gateway for serving Japanese and Asian corporations in the MENA region.

With the opening of its Riyadh branch, MUFG also has direct capability to offer Saudi riyal-denominated transactions for loan, deposit, fund transfer, and foreign exchange.

“Demand from businesses for these services will continue to grow,” said Fujisawa. The Kingdom’s transformation strategy is very much investment-led and the private sector will continue to play an important role, he added.

Ehsan Khoman, head of emerging markets research for EMEA at MUFG, said: “The focus in Saudi Arabia has turned back to the Kingdom’s Vision 2030, after its success in containing the virus. As the impact of COVID-19 ebbs, we are looking to see how quickly the Vision 2030 structural reform program regains speed. We look for three core areas where reforms could have the largest impact. First, improving the business environment — Saudi Arabia has made material progress in its World Bank Ease of Doing Business score — rising 32 points on the scale. Second, the continued success in enhancing the business environment will foster FDI which is central to the pivot from government spending to investment as the engine of growth. Last, but not least, addressing labor market imbalances is vital to improving employment opportunities for Saudi nationals.

“We remain optimistic that the reform agenda will not only boost the potential growth rate over the long term, but will also structurally transform the economy, enabling the reversal of longstanding impediments to investment and productivity.”

According to Khoman, corporate activity is at the highest level since November 2019. Saudi Arabia’s PMI – a key barometer of the health of corporate activity – rose from 57 in December to 57.1 in January – the highest reading in 14 months, and the fifth consecutive month of sequential gains. “These robust PMI readings are consistent with the changing modus operandi to make investment, not government spending, the engine of growth,” he added.

Photo Caption: Hiroaki Fujisawa (Head of MUFG’s Riyadh Branch)