JEDDAH: Fiscal consolidation, coupled with improved non-oil revenues, will mean a smaller-than-anticipated fiscal deficit in Saudi Arabia in both 2016 and 2017, according to economists.
In their latest macroeconomic update, researchers from Jadwa Investment have also revised some of their 2016 and 2017 forecasts to take into account the recent set of fiscal reforms and economic data.
“Since the start of 2016, and in line with targets specified in the National Transformation Program (NTP 2020), prudent policies to reform the fiscal budget have been taken,” said Fahad Alturki, chief economist and head of research at Jadwa Investment in Riyadh.
The commencement of an international sovereign bond issuance program will have a dual benefit of protecting FX reserves and reducing pressure on domestic liquidity, according to the Jadwa report.
The Jadwa economists expect the Ministry of Finance to take steps to gradually register, list and trade government debt instruments on the Saudi stock exchange, thereby establishing a benchmark yield curve. “Meanwhile, the current account deficit is also forecast to be smaller than anticipated, mainly due to lower-than-expected value of imported goods and services,” said the report.
“Along with the international bond issuance, several other efforts by the government have halted the sharp rise in the cost of funding, as interbank rates have stabilized recently,” said the economists.
“Despite the hike to energy prices at the end of 2015, inflation continued on a decelerating trend, which we believe is reflective of the slowdown in consumption,” they said.
The Jadwa researchers expect Saudi Arabia’s economic performance to remain positive for the remainder of 2016.
“We forecast overall GDP growth to reach 1.1 percent and 0.6 percent in 2016 and 2017, respectively, with oil sector GDP growing by 2.1 percent and 0.6 percent over the next two years,” said the economists.
Non-oil GDP is forecast to reach 0.3 percent and 0.5 percent during the same period, they said.
“The contribution of oil production to annual economic growth is likely to remain on the positive side. Albeit at a slower pace, we expect private sector growth to remain positive at 0.7 percent, as the recent moderation in credit growth is expected to ease following the recent issuance of international sovereign bonds and the resumption of government payments,” said the Jadwa report.
Business surveys point toward an expansion in the non-oil private economy in 2016, with the non-oil purchasing managers’ index averaging 54.8, year-to-October, slightly down from the full-year average of 56.7 in 2015. Year-on-year growth in broad money supply (M3) turned positive in October for the first time since the start of 2016, according to the report.
Saudi economic performance to remain positive this year
Saudi economic performance to remain positive this year
UAE’s residential real estate market to see softer home sales
- Moody’s sees mild softening of prices over the next 12 - 8 months as rising completions add supply
RIYADH: The UAE’s residential real estate market is expected to see a modest decline in developer sales and a mild softening of prices over the next 12 to 18 months as rising completions add supply, Moody’s said.
Despite near-term easing, the credit ratings agency noted that developers are supported by strong revenue backlogs and solid financial positions, while regulatory measures have reduced banks’ exposure to the construction and property sectors, helping to preserve robust solvency and liquidity buffers across the financial system.
The broader trend is reflected in the UAE’s real estate market, which recorded a strong performance during the first three quarters of 2025, according to Markaz.
In Dubai, transaction values increased 28.3 percent year on year to 554.1 billion Emirati dirhams ($150.88 billion), while Abu Dhabi recorded total sales of 58 billion dirhams, up 75.8 percent year on year. The number of transactions in Abu Dhabi rose 42.3 percent to 15,800.
The report said: “After five years of extraordinary growth in the UAE’s residential real estate market, particularly in Dubai, we expect developer sales to decline modestly and some price softening over the next 12 to 18 months as rising completions add supply.
“From 2026 to 2028, around 180,000 new units will be completed in Dubai, a significant increase from prior years that is likely to weigh on demand and slow price growth.
“However, fundamentals remain supportive, underpinned by continued population growth and an influx of high-net-worth individuals. Rated developers’ credit quality will remain resilient, supported by strong revenue backlogs, front-loaded payment plans and solid financial positions.”
Munir Al-Daraawi, founder and CEO of Dubai-based Orla Properties, told Arab News the Moody’s report underscores what the firm is seeing on the ground, namely “a market that is successfully transitioning from a period of extraordinary growth to one of sustainable stability.”
He added: “While a mild softening of prices and a modest decline in sales are anticipated over the next 12 to 18 months, these are natural adjustments for a maturing global hub like Dubai.”
Al-Daraawi believes the the projected delivery of 180,000 units between 2026 and 2028 is not a cause for concern, but “a reflection of the UAE’s long-term appeal to high-net-worth individuals and a growing population.”
The CEO added: “The report rightly points out that fundamentals remain supportive, underpinned by Dubai’s 2040 Urban Master Plan and a significant influx of global talent.”
He went on to note that the resilience of the sector is further bolstered by the solid financial positions of developers and the strong regulatory measures that have shielded the banking sector from excessive exposure.
“This creates a robust ecosystem where credit quality remains high, even as we navigate a more competitive landscape. For boutique and luxury-focused developers, the current environment emphasizes the importance of quality, execution, and strategic capital allocation — factors that will continue to define the UAE’s real estate success story,” said Al-Daraawi.
The current environment emphasizes the importance of quality, execution, and strategic capital allocation.
Munir Al-Daraawi, Founder and CEO of Orla Properties
Riad Gohar, co-founder and CEO of BlackOak Real Estate, told Arab News that while Moody’s is correct to say that supply is rising, the conclusion of a broad slowdown ignores the structure of this current economic cycle.
He added: “First, this is not a debt-fueled market. Around 83 percent of Dubai residential transactions in 2024 and 2025 were non-mortgaged. That means the market is equity-driven, not credit-driven. When cycles are not built on leverage, corrections are typically shallow and segmented, not systemic. “
He added that the macroeconomic backdrop is stronger than in past cycles, driven by sustained non-oil gross domestic product increase, structural reforms, population growth, and capital inflows aligned with long-term national plans.
“Demand is not purely speculative; it is driven by migration, business formation, and wealth relocation,” the CEO said.
“Third, prime vs. non-prime must be separated. Any pressure from increased completions is more likely to affect marginal locations, not established prime areas supported by global HNWI inflows. Historically, prime assets in Dubai have shown resilience even during broader market pauses,” Gohar added.
He continued to clarify that for smaller developers, some may feel margin compression if sales moderate, but this becomes a consolidation phase, not a systemic risk.
“Banks’ real estate exposure has already declined to around 12 percent of total loans — from 19 percent in 2021 — and NPLs (non-performing loans) are low at 2.9 percent, meaning financial contagion risk is limited. Regulatory escrow structures and stricter oversight further reduce spillover,” the CEO said.
“We are in a capital-rich, cash-driven cycle, regulated market with strong GDP and population growth. If anything, weaker fringe players exiting would strengthen the core not destabilize it,” he said.
The Moody’s report highlighted that while most developers it rates will generate “substantial excess cash” over the next two to three years, there will be fewer opportunities to make significant investments, especially within the Dubai real estate market.
As well as prompting a shift toward corporate governance and, in particular, how developers deploy their rising liquidity, some firms are looking to diversify beyond their core business models.
“For instance, Binghatti has recently launched its first master-planned villa community, marking a departure from its historical focus on single-plot high-rise developments, as demand for villas continues to outperform that for apartments,” said the report.
It continued: “Others are looking beyond Dubai and the UAE for growth, whether through geographic diversification or expansion into unrelated sectors.
“For example, Damac’s owner, Hussain Sajwani, has announced significant planned investments in data center development across the US and Europe.
“Emaar continues to develop actively in Egypt and India and is evaluating potential entry into China and the US. Aldar has started development projects in the UK and Egypt, while Arada has begun building in Australia and the UK and Sobha is expanding into the US.”
