Connect with us

Economics

Foreign investors flock to flagship Saudi economic conference

Published

on

A delegate arrives at the King Abdulaziz Conference Centre in Saudi Arabia’s capital Riyadh to attend the Future Investment Initiative (FII) forum.

Fayez Nureldine | Afp | Getty Images

Thousands of financiers, founders and investors are set to descend on the Saudi capital of Riyadh for the eighth edition of the kingdom’s Future Investment Initiative, the flagship economic conference at the heart of Vision 2030 — the multi-trillion dollar plan to modernize and diversify Saudi Arabia’s economy.

Described in past years by some attendees as a bonanza for Saudi cash, fund managers who spoke to CNBC this year draw a distinctly different picture as the kingdom simultaneously upholds more requirements for prospective fundraisers and investors, while also facing a revenue crunch amid lower oil prices and production.

“Without question, it’s gotten way more competitive to attract money from the kingdom,” Omar Yacoub, a partner at U.S.-based investment firm ABS Global, which manages nearly $8 billion in assets, told CNBC. “Everyone and anyone has been going to ‘kiss the rings,’ so to speak, in Riyadh.”

“Competition for capital has heated up, combined with other factors such as Saudis always having a ‘home bias’ towards investing, plus the broader dynamic of a tighter budget throughout the kingdom due to lower oil prices,” Yacoub said. “This has meant that investing internationally has become much more selective.”

As Saudi Arabia moves full steam ahead with its focus on domestic investment, it’s introduced more stringent conditions for foreigners coming to the kingdom to take capital elsewhere. The kingdom’s $925 billion sovereign wealth fund, the Public Investment Fund, saw its assets jump 29% to 2.87 trillion Saudi riyals ($765.2 billion) in 2023 — and local investment was a major driver.

Analyst discusses Saudi Arabia's $100-per-barrel oil price target

Saudi Arabia’s recently-updated Investment Law seeks to attract more foreign investment as well — and it’s set itself a lofty target of $100 billion in annual foreign direct investment by 2030. Currently, that figure is still a long way from that goal as foreign investment has averaged around $12 billion per year since Vision 2030 was announced in 2017.

“It’s no longer about ‘take our money and leave’ — it’s about adding value,” said Fadi Arbid, founding partner and chief investment officer of Dubai-based investment manager Amwal Capital Partners. “Value meaning hiring, developing the asset management ecosystem, creating new products, bringing in talent, and investing in Saudi capital markets also. So it’s multi-faceted investment, not only a pure financial transaction. It’s beyond that.”

‘More disciplined, more rational’

At the same time, the kingdom is taking clear steps to scale back spending, as oil prices fall well below its fiscal breakeven figure and it continues with crude production cuts agreed upon by OPEC+.

That fiscal breakeven oil price — what the kingdom needs a barrel of crude to cost in order to balance its government budget — has risen sharply as Saudi Arabia pours trillions of dollars into giga-project NEOM.

The IMF’s latest forecast in April, put that breakeven figure at $96.20 for 2024; a roughly 19% increase on the year before, and about 28% higher than the current price of a barrel of Brent crude, which was trading at around $72.75 as of Monday morning.

“I don’t think Saudi has the same means that they had literally two years ago,” one regional investor, who requested anonymity in order to speak freely, said. Nonetheless, they added, the kingdom “remains one of the very few countries that still have money to give. It might be somewhat on pause today, but … now it’s more disciplined, more rational.”

Watch CNBC's full interview with Saudi Investment Minister Khalid Al Falih

Some fund managers with years of experience in the Gulf suggested it may be too little too late for many of the investors making their first forays to the kingdom.

“You should have started that process two, three, four years ago,” Arbid said. However, he added, “For those that are coming in queue now, that doesn’t mean that they shouldn’t position — because it’s a cycle, right? But now, I think they’re more deliberate about it — they say you need to commit to the country.”

One example is the kingdom’s headquarters law, which went into effect on Jan. 1, 2024, and requires foreign companies operating in the Gulf to base their Middle Eastern HQ offices in Riyadh if they want contracts with the Saudi government.

In the shadow of regional war

Saudi Arabia's non-oil growth is proving to be 'robust,' economist says

“Saudi has done a phenomenal job recently of shielding itself from geopolitical events,” Arbid said.

That is also aided by the fact that local investors make up the majority of market participants, and local investor confidence is strong. The Tadawul All Shares Index, Saudi Arabia’s leading stock market index, is up 16.48% in the last year.

Still, some analysts in the region warn that the expanding crises in the Middle East have the potential to cause further instability.

“The war has gradually escalated to the point where there is a de-facto regional war,” Aziz Alghashian, director of research at the Observer Research Foundation Middle East, told CNBC. “The ongoing war is not only a geopolitical crisis, but the continuation of it has potential to create more radicalization in and around the region.”

“Attracting FDI and tourism, while maintaining oil prices at a desired level, are key for keeping Saudi Arabia’s mega projects and diversification plans on track,” Alghashian said.

“This of course is complicated by regional war, and so economy and security go very much hand in hand.”

Economics

German inflation, March 2025

Published

on

Customers shop for fresh fruits and vegetables in a supermarket in Munich, Germany, on March 8, 2025.

Michael Nguyen | Nurphoto | Getty Images

German inflation came in at a lower-than-expected 2.3% in March, preliminary data from the country’s statistics office Destatis showed Monday.

It compares to February’s 2.6% print, which was revised lower from a preliminary reading, and a poll of Reuters economists who had been expecting inflation to come in at 2.4% The print is harmonized across the euro area for comparability. 

On a monthly basis, harmonized inflation rose 0.4%. Core inflation, which excludes food and energy costs, came in at 2.5%, below February’s 2.7% reading.

Meanwhile services inflation, which had long been sticky, also eased to 3.4% in March, from 3.8% in the previous month.

The data comes at a critical time for the German economy as U.S. President Donald Trump’s tariffs loom and fiscal and economic policy shifts at home could be imminent.

Trade is a key pillar for the German economy, making it more vulnerable to the uncertainty and quickly changing developments currently dominating global trade policy. A slew of levies from the U.S. are set to come into force this week, including 25% tariffs on imported cars — a sector that is key to Germany’s economy. The country’s political leaders and car industry heavyweights have slammed Trump’s plans.

Meanwhile Germany’s political parties are working to establish a new coalition government following the results of the February 2025 federal election. Negotiations are underway between the Christian Democratic Union, alongside its sister party the Christian Social Union, and the Social Democratic Union.

While various points of contention appear to remain between the parties, their talks have already yielded some results. Earlier this month, Germany’s lawmakers voted in favor of a major fiscal package, which included amendments to long-standing debt rules to allow for higher defense spending and a 500-billion-euro ($541 billion) infrastructure fund.

This is a breaking news story, please check back for updates.

Continue Reading

Economics

First-quarter GDP growth will be just 0.3% as tariffs stoke stagflation conditions, says CNBC survey

Published

on

U.S. President Donald Trump speaks to members of the media aboard Air Force One before landing in West Palm Beach, Florida, U.S., March 28, 2025. 

Kevin Lamarque | Reuters

Policy uncertainty and new sweeping tariffs from the Trump administration are combining to create a stagflationary outlook for the U.S. economy in the latest CNBC Rapid Update.

The Rapid Update, averaging forecasts from 14 economists for GDP and inflation, sees first quarter growth registering an anemic 0.3% compared with the 2.3% reported in the fourth quarter of 2024. It would be the weakest growth since 2022 as the economy emerged from the pandemic.

Core PCE inflation, meanwhile, the Fed’s preferred inflation indicator, will remain stuck at around 2.9% for most of the year before resuming its decline in the fourth quarter.

Behind the dour GDP forecasts is new evidence that the decline in consumer and business sentiment is showing up in real economic activity. The Commerce Department on Friday reported that real, or inflation-adjusted consumer spending in February rose just 0.1%, after a decline of -0.6% in January. Action Economics dropped its outlook for spending growth to just 0.2% in this quarter from 4% in the fourth quarter.

“Signs of slowing in hard activity data are becoming more convincing, following an earlier worsening in sentiment,” wrote Barclays over the weekend.

Another factor: a surge of imports (which subtract from GDP) that appear to have poured into the U.S. ahead of tariffs.

The good news is the import effect should abate and only two of the 12 economists surveyed see negative growth in Q1. None forecast consecutive quarters of economic contraction. Oxford Economics, which has the lowest Q1 estimate at -1.6%, expects a continued drag from imports but sees second quarter GDP rebounding to 1.9%, because those imports will eventually end up boosting growth when they are counted in inventory or sales measures.

Recession risks rising

On average, most economists forecast a gradual rebound, with second quarter GDP averaging 1.4%, third quarter at 1.6% and the final quarter of the year rising to 2%.

The danger is an economy with anemic growth of just 0.3% could easily slip into negative territory. And, with new tariffs set to come this week, not everyone is so sure about a rebound.

“While our baseline doesn’t show a decline in real GDP, given the mounting global trade war and DOGE cuts to jobs and funding, there is a good chance GDP will decline in the first and even the second quarters of this year,” said Mark Zandi of Moody’s Analytics. “And a recession will be likely if the president doesn’t begin backtracking on the tariffs by the third quarter.”

Moody’s looks for anemic Q1 growth of just 0.4% that rebounds to 1.6% by year end, which is still modestly below trend.

Stubborn inflation will complicate the Fed’s ability to respond to flagging growth. Core PCE is expected at 2.8% this quarter, rising to 3% next quarter and staying roughly at that level until in drops to 2.6% a year from now.

While the market looks to be banking on rate cuts, the Fed could find them difficult to justify until inflation begins falling more convincingly at the end of the year.

Continue Reading

Economics

Tariffs to spike inflation, stunt growth and raise recession risks, Goldman says

Published

on

U.S. President Donald Trump announces that his administration has reached a deal with elite law firm Skadden, Arps, Slate, Meagher & Flom during a swearing-in ceremony in the Oval Office at the White House on March 28, 2025 in Washington, DC. 

Andrew Harnik | Getty Images

With decision day looming this week for President Donald Trump’s latest round of tariffs, Goldman Sachs expects aggressive duties from the White House to raise inflation and unemployment and drag economic growth to a near-standstill.

The investment bank now expects that tariff rates will jump 15 percentage points, its previous “risk-case” scenario that now appears more likely when Trump announces reciprocal tariffs on Wednesday. However, Goldman did note that product and country exclusions eventually will pull that increase down to 9 percentage points.

When the new trade moves are enacted, the Goldman economic team led by head of global investment research Jan Hatzius sees a broad, negative impact on the economy.

In a note published on Sunday, the firm said “we continue to believe the risk from April 2 tariffs is greater than many market participants have previously assumed.”

Inflation above goal

On inflation, the firm sees its preferred core measure, excluding food and energy prices, to hit 3.5% in 2025, a 0.5 percentage point increase from the prior forecast and well above the Federal Reserve’s 2% goal.

That in turn will come with weak economic growth: Just a 0.2% annualized growth rate in the first quarter and 1% for the full year when measured from the fourth quarter of 2024 to Q4 of 2025, down 0.5 percentage point from the prior forecast. In addition, the Wall Street firm now sees unemployment hitting 4.5%, a 0.3 percentage point raise from the previous forecast.

Taken together, Goldman now expects a 35% chance of recession in the next 12 months, up from 20% in the prior outlook.

The forecast paints a growing chance of a stagflation economy, with low growth and high inflation. The last time the U.S. saw stagflation was in the late 1970s and early ’80s. Back then, the Paul Volcker-led Fed dramatically raised interest rates, sending the economy into recession as the central bank chose fighting inflation over supporting economic growth.

Three rate cuts

Goldman’s economists do not see that being the case this time. In fact, the firm now expects the Fed to cut its benchmark rate three times this year, assuming quarter percentage point increments, up from a previous projection of two rate cuts.

“We have pulled the lone 2026 cut in our Fed forecast forward into 2025 and now expect three consecutive cuts this year in July, September, and November, which would leave our terminal rate forecast unchanged at 3.5%-3.75%,” the Goldman economists said, referring to the fed funds rate, down from 4.25% to 4.50% today.

Though the extent of the latest tariffs is still not known, the Wall Street Journal reported Sunday that Trump is pushing his team toward more aggressive levies that could mean an across-the-board hit of 20% to U.S. trading partners.

Get Your Ticket to Pro LIVE

Join us at the New York Stock Exchange!
Uncertain markets? Gain an edge with 
CNBC Pro LIVE, an exclusive, inaugural event at the historic New York Stock Exchange.

In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12.

Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles, and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!

Continue Reading

Trending