Investor Optimism In KSA High, Ranking Third Globally In Emerging Markets

Saudi Arabia re-enters Kearney’s 2023 Foreign Direct Investment (FDI) Confidence Index, ranking 24^th globally. The Kingdom’s rise was fueled high GDP growth (8.7% in 2022), sweeping pro-business reforms, a strong fiscal outlook, and accelerating progress in economic diversification.

In addition,for the first time in its 25-year history, the FDI ConfidenceIndex features an exclusive ranking for Emerging Markets, with Saudi Arabia ranking third in the Middle East, and sixth globally, highlighting the attractive power of the Kingdom’s combination of economic scale and relentless transformation efforts as it drives the realization of Vision 2030.

The Emerging Markets ranking aims to provide business leaders with additional insights into which emerging markets are most attractive to investors. Investor Optimismwashigh in Saudi Arabia with the country ranking third globally. This is due to strong and growing technological and innovation capabilities, a highly collaborative approach to public-private investment, the sustained fiscal windfall from solid oil revenue, and the recovery of the tourism sector following major pandemic-induced disruption.

“The Kingdom’s ranking this year is quite clearly only the beginning. We are witnessing in Saudi Arabia the emergence of a new investment paradigm that features co-creation of value and mutual skin in the game, a long-term strategic orientation with respect to investment, and a pervasive commitment to innovation in all areas. And underlying all of this is a clear focus on advancing institutional clarity in ways optimized for investors.” commented Rudolph Lohmeyer, Partner, National Transformations Institute, Kearney Middle East.

FDICI MENA Rankings

The UAE and Qatar were ranked 18^th and 21^st respectively in the FDI Confidence Index, boosting the Middle East’s presence. The GCC countries also placed high in the Emerging Markets ranking with UAE ranking third and Qatar ranking fourth globally.

The UAE’s GDP grew 7.9% in 2022 with the country anticipated to continue growing at a steady pace in 2023 and 2024 with growth rates of 3.2 percent and 4.8 percent, respectively. The index reveals that the UAE business environment is strong, and among the factors that are most important to investors, the country’s growing technological and innovation capabilities stand out.

Qatar rose three spots in the global ranking from 2022, likely due to Qatar’s prestigious hosting of the FIFA World Cup last year, which boosted investors’ interest, coupled with the country’s National Vision 2030, aimed at developing and diversifying the economy.The country’s robust GDP growth of 4.1 percent in 2022, up from 1.5 percent in 2021, can also be attributed to the investors’ growing confidence.

Investor sentiment is growing in other Middle East countries with Egypt, Turkey, and Morocco landing at 14^th, 15^th, and 16^th in the emerging markets ranking respectively.

FDICI Global Rankings

The report from the global strategy and management consulting firm reflects cautious investor optimism about the global economy. Indeed, more than three-quarters (82%) said they are planning to increase their FDI in the next three years and 86 percent cited FDI as more important for their corporate profitability and competitiveness in the next three years. Yet this positive sentiment is tempered by concern about downside risk.

“While investors are generally optimistic about the outlook for FDI, our results this year also reflect a degree of caution,” says report co-author Erik R. Peterson, Partner and Managing Director of Kearney’s Global Business Policy Council. “Investors cited a rise in commodity prices, an increase in geopolitical tensions, and rising political instability in emerging markets as among the top risk factors over the next three years.”

The United States takes the top ranking for the 11th consecutive year. Canada reclaims the second position after falling to third in 2022, and Japan jumps to third place from a rank of fourth last year. Germany drops two spots to fourth, likely as a result of the economic and energy challenges it has faced due to the geopolitical crisis in Eastern Europe. The United Kingdom maintains the fifth position, and France follows closely behind. China jumps from 10th position to 7th, perhaps attributable to Beijing’s decision to drop its zero-COVID policy in the fourth quarter of 2022. Overall, this year’s survey once again demonstrated investor preference for developed markets, which accounted for 19 out of 25 of the countries on the Index.

The 2023 Index also finds that business leaders believe globalization is and will remain the central force in foreign direct investment. A distinct majority of respondents (66 percent) anticipate an increase in globalization in the next three years, while only 23 percent expect a decrease. Those anticipating an expansion of globalization cite a combination of connected digital infrastructure alongside growing trade opportunities and limited trade barriers as the primary driving forces. But investors also acknowledge that globalization is changing.

“While our findings show investors believe in the benefits of globalization and expect it to strengthen, they also anticipate more regionalization over the next three years and that national governments will pursue strategies to increase self-sufficiency,” says report co-author Terry Toland, manager at the Global Business Policy Council. “These results suggest an awareness that while globalization will continue, its nature may be shifting—and business leaders will need to prepare accordingly.”