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National Transformation Plan: many promises, few details
The National Transformation Plan (NTP) released by the Saudi government is a further step towards execution of Saudi Vision 2030 through a set of ambitious interim targets to achieve by 2020 by 24 government bodies. The NTP is a comprehensive program encompassing medium-term growth boosting initiatives and fiscal consolidation measures. The sequencing and details of the fiscal measures are however still left nebulous. Implementation of growth-boosting initiatives will require a challenging crowding in of private sector investment, particularly from domestic sources.

The NTP is likely to introduce a number of one-off supply-side shocks to inflation through its fiscal or labor measures, which could negatively impact Real Effective Exchange Rate (REER) competitiveness. Discretionary consumption growth and real incomes are likely to remain under pressure. We find the diversification measures encouraging, although they appear too ambitious to be met within the time frame envisaged in the NTP, in our view. The focus on diversification could introduce medium-term incentives to adopt a more competitive exchange rate, while also detracting from the binding fiscal constraint under which the government has to operate. Energy policy is likely to be less aggressive and support oil prices. Fiscal targets are difficult to reach, but medium-term oil prices of at least US$50-65/bbl could support NTP progress.

Table 4: Selected macro Key Performance Indicators (KPIs) under the National Transformation Plan

Government entity
Ministry of Finance
Key Performance Indicator (KPI)
Total non-oil revenues
Budgeted salaries and wages
Salaries and wages as a percentage of the budget
Approved projects according to criteria and timeline (% of total)
Credit rating
Government debt as percentage of gross domestic product (%)
Total recorded non-oil assets
Unit: SARbn, SARbn, %, %, -, %, SARtrn
Baseline: 163.5, 480, 45, 0, A1, 7.7, 3
2020 target: 530, 456, 40, 40, Aa2, 30, 5
Regional b'mark: 10.9, N/A, 30, 30, Aa2, 35, N/A
Global b'mark: 691.0, N/A, 12, 78, Aaa, 54, N/A

Ministry of Economy & Planning
Total revenue resulting from privatization projects
Value of water and electricity subsidy decrease
Percentage decrease in non-oil subsidy
Value of private sector contribution to GDP
Unit: Under Study, SARbn, %, SARbn
Baseline: Under Study, 0, 0, 993.3
2020 target: Under Study, 200, 20, Under Study
Regional b'mark: N/A, N/A, N/A, 122.6
Global b'mark: N/A, N/A, N/A, 14,133.8

Ministry of Energy, Industry and Mineral Resources
Value of exports of non-oil commodities
Value of the mining sector's contribution to GDP
Local content in expenditure of public and private sectors
Petroleum production capacity
Dry gas production capacity
Refining capacity
Unit: SARbn, SARbn, %, mn bpd, bn cf pd, mn bpd
Baseline: 185, 64, 36, 12.5, 12, 2.9
2020 target: 330, 97, 50, 12.5, 17.8, 3.3
Regional b'mark: Under Study, 13, Under Study, 3.8, 5.7, 1.1
Global b'mark: Under Study, 262, 57, 11, 16, 1.9

Ministry of Labor and Social Development
Unemployment rate for Saudis
Cost of employment of Saudis compared to expatriates
Proportion of female labor force
Unit: %, %, %
Baseline: 11.6, 400, 23
2020 target: 9, 280, 28
Regional b'mark: Under Study, N/A, Under Study
Global b'mark: 5.8, N/A, Under Study

Ministry of Hajj and Umrah
Number of formal Hajj pilgrims (domestic and foreign)
Number of Umrah Pilgrims from abroad
Number of Umrah pilgrims (domestic and GCC nationals)
Unit: mn, mn, mn
Baseline: 1.5, 6, Under Study
2020 target: 2.5, 15, Under Study
Regional b'mark: N/A, N/A, N/A
Global b'mark: N/A, N/A, N/A

Commission for Tourism and National Heritage
% contribution of tourism sector to GDP
Unit: %
Baseline: 2.9
2020 target: 3.1
Regional b'mark: 4.9
Global b'mark: 5.4

Ministry of Civil Service
% decrease in the payroll and benefits expenditure
% of workers reduction in the civil service sector
Unit: %, %
Baseline: Under Study, Under Study
2020 target: 20, 20
Regional b'mark: Under Study, Under Study
Global b'mark: 22, 18

Saudi Arabian General Investment Authority
Foreign Direct Investment (FDI)
Time needed to issue work visas for new expat employees
Time needed to issue new business permits
Unit: SARbn, Day, Day
Baseline: 30, 30, 19
2020 target: 70, 10, 1
Regional b'mark: 45, 10, 8
Global b'mark: 481, 3, 0.5

Source: National Transformation Plan

Merrill Lynch
GEMs Paper #26 | 30 June 2016
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