Economic Analysis - Tourism A Diversification Bright Spot - MAR 2018

BMI View: Saudi Arabia's tourism sector will be a bright spot for economic diversification in the country in the years ahead , given the kingdom's existing competitive advantage in religious tourism and the ongoing development of entertainment opportunities and facilities to cater to the large domestic population . D eveloping non-religious tourism beyond a domestic audience will take time to materialise though , given burdensome procedures to enter the country and Saudi Arabia ' s conservative cultural and social norms.

We see the tourism sector as one of the most promising industries for growth as part of Saudi Arabia's economic diversification plans over the coming years. The tourism sector (including indirect effects) already accounted for 10.2% of GDP in 2016 according to the World Travel and Tourism Council, above the Middle East's average of 9.1%, and we see room to further develop various sub-segments. As such, we forecast international tourism receipts to grow by an annual average of 5.8% over 2018-2022. Given the strong growth potential of the sector, we believe that it will be a main recipient of public investment over the coming years. Saudi Arabia already has a competitive advantage over its GCC peers in religious tourism. Meanwhile, the development of entertainment opportunities in the country - a key aspect of the social transformation plan put forward by Crown Prince Mohammed bin Salman - will encourage domestic tourism, also boding well for consumer spending. On the other hand, the development of non-religious foreign tourism will take longer to come online, owing to burdensome procedures and conservative cultural norms.

Tourism Development A Major Government Priority

Room To Further Grow The Sector
Middle East - Tourism Contribution, % GDP (Including Indirect Effects) In 2016
Source: World Tourism & Travel Council, BMI

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