Key Recent Updates in the Kingdom of Saudi Arabia

29/07/2025

Gabriel Levesque, SBJBC Intern

Summary

The Kingdom of Saudi Arabia has been no stranger to innovation and growth within the past decade. Vision 2030’s goal of diversifying the economy has seen focus placed on sectors such as real estate, tourism, and entertainment as exemplified by the NEOM giga-project and the country’s hosting of the 2034 Football World Cup.

This article will cover key developments within the Kingdom over the past month, from Saudi’s growing mineral wealth to the challenges faced by Tadawul and the PIF. In addition, coverage of the NEOM giga-project in this article highlights the need for closer collaboration between the UK and Saudi Arabia to achieve their respective goals.

PIF’s Budget Restructuring and NEOM’s UK Hydrogen Set Back

The Kingdom of Saudi Arabia’s ambitious giga-project, entitled NEOM and valued at $500 billion, is facing several challenges as it faces new setbacks amid wider budget shake ups within PIF. While parts of NEOM such as the Green Hydrogen Project are 80% complete, the PIF has ramped up its spending cuts with a mandated minimum 20% reduction in 2025 across its portfolio, amid a general growing budget deficit and rising debt in the Kingdom. Aside from these developments out of PIF, the project’s slowdown has also occurred as NEOM has faced challenges, including low demand from international investors, which has led some to view the project as overly ambitious in a currently undersized market. The Saudi government is paying close attention to these developments, with Crown Prince Mohamed Bin Salman, calling for emergency measures to reinforce the project’s global appeal. This has had a direct impact on NEOM, which cancelled a contract worth over $5 billion a day before a singing ceremony.

The UK has been indirectly impacted by these changes as a planned facility in Immingham, deemed of high importance to the world’s largest green hydrogen project, has been placed on hold. This facility was expected to produce enough hydrogen to power around 1 million UK homes a year but was also impacted by the lack of government incentives in the UK. Immingham was originally intended for the importation of green ammonia from NEOM, to be converted into hydrogen for British industrial use. However, current UK policy excludes green ammonia conversion from being subsidised, rendering the project ‘financially unviable’. This project was mutually beneficial for the UK and the Kingdom of Saudi Arabia, as it ensured Saudi exports to one of the G7’s largest economies, all the while supporting the UK’s clean energy transition goals.

However, there is still hope for greater investment in the future for the UK due to NEOM’s ambitious goal of producing up to 600 tonnes per day of carbon-free hydrogen energy by late 2026. NEOM has still only confirmed one agreement with other European companies, namely Total Energies, leaving greater opportunity for UK-Saudi partnerships in this sector. This update demonstrates that business between the two nations is not a one-way street. There is potential for progress to be made once greater government incentives come about in the UK, to support rather than supplant investments from the Kingdom of Saudi Arabia.

Saudi Arabia’s Mineral Wealth

The recent discovery of untapped mineral reserves in the Najran province has doubled the province’s unexploited mineral wealth to an estimated value of $60 billion. This follows a wider trend, as in 2022, the Kingdom announced it had revised the estimated value of its mineral wealth from $1.3 trillion to $2.5 trillion. Abdullah Al Ahmari, assistant to the Saudi Minister of Industry and Mineral Resources, revealed that the Najran soil contains valuable metals such as gold, silver, copper, zinc, sulfur, graphite, and iron ore. In the process, the Kingdom has awarded over 2,400 licenses for mineral exploitation and development, in line with the 2019 Mineral Investment Law, as part of broader efforts to diversify the economy under Vision 2030.

PIF has been actively involved in the mining sector, with the establishment of affiliated company Ma’aden, also known as Manara Minerals, set up for mining initiatives abroad and within Saudi Arabia. Planned investments abroad will be between $25-30 billion for new projects in Brazil, Canada, and Indonesia over the next 10 years. Within the Kingdom itself, Ma’aden partnered with Ivanhoe Electric in 2023 to mine an area larger than Denmark. These developments have come about as the Kingdom aims to become a leader in the minerals ‘super region’, comprising the Middle East, Central Asia, South Asia, and Africa.

The strategic location of the mines, close to the Jazan port on the Red Sea, alongside the Kingdom’s rapidly developing infrastructure in the south, is a testament to the mineral sector’s strong economic potential. Abdullah Al Ahmari deemed Saudi Arabia as a ‘promising land of investment opportunities in all mining activities’. Indeed, foreign investment in the Saudi mining industry has been encouraging.

On 14th January 2025, the UK and Saudi Arabia signed a critical minerals cooperation partnership. The agreement aims to strengthen supply chains, support UK businesses, and attract investment into the UK. The partnership was formalised during a British ministerial visit to the Future Minerals Forum in Riyadh, with the agreement focusing on securing long-term supplies of critical minerals like lithium, copper, and nickel, essential for industries like AI, clean energy, and new technologies. Additionally, UK mining company Vedanta Resources has announced a $2 billion investment in Saudi Arabia for the purpose of establishing a copper processing facility. This investment further contributes to the region’s industrial transformation.

More recently, the US has followed suit, beginning talks over a similar deal in May. These partnerships could secure substantial investment into the Saudi mineral industry all the while guaranteeing a secure, long-term supply of critical minerals required for global manufacturing.

Saudi’s Tadawul’s Market Cap Fall

Tadawul’s overall share index has fallen to a 20-month low as of June, owing to weaker oil prices, global tension over US tariffs, and concerns regarding banks’ lending margins. The Saudi market’s recent struggles have been confirmed on several fronts, including a 7% decline in the number of transactions and a 26% decrease in the Kingdom’s trade volume compared to 2024. Several Saudi IPOs have experienced the effects of the downturn, including the Saudi low-cost airline Flynas, which saw its shares decrease by 3.3% on the first day of trading. This initial downturn, while seemingly minor, may encourage other companies planning to go public to lower initial valuations, particularly as Flynas share price still remains below its initial trading price as of writing.

Flynas was not the only company affected, standing as the second successive debutant to experience a decline in its share price on its first day on the market. Similarly, the Specialized Medical Company’s (SMC) shares fell on the first day of trading, in the process becoming the third company in a row to do so on the main market. Aqib Elahi Mehboob, from BSF Capital, remarked that the current environment is particularly tough for larger IPOs compared to small to medium-sized IPOs, with the situation unlikely to improve for them until at least the end of the year. However, he also noted that the situation did not warrant alarmism. He argued that ‘if a company forecasts it will make a certain profit and then misses that significantly, it’s normal for the stock to then underperform’. This dip comes after an extremely successful past year for the Saudi market, with 11 of the 14 largest IPOs securing gains ranging from 3% to 147% by the start of this year. Similarly, the Saudi capital markets managed an unprecedented SAR 1 trillion in assets for the first-time last year.

Nevertheless, Tadawul has shown adaptability in trying to find solutions to address the downturn. They changed the structure of the minimal incremental price movement bands for securities in Tadawul’s main and junior markets. This helps assess liquidity alongside potential gains and losses in trading. The Saudi stock market is largely dependent on local investor flows due to general GCC volatility and continued efforts to diversify away from oil in Saudi Arabia to create a more stable environment will be essential to encourage a return of international capital flows

PIF Profit Fall

The Public Investment Fund (PIF) reported a 60% decline in profits in a financial statement released to the London Stock Exchange earlier this month. High interest rates and inflation have become a major concern for the PIF, which has also experienced a surge in costs, operational changes, and broader economic challenges. Furthermore, greater ‘net impairment charges on financial assets’ impacted the PIF’s overall earnings. These strategic changes have come in conjunction with the oil price falling from $82 last year to $65 more recently. This has had knock-on effects with Aramco cutting approximately $40 billion in dividends..

The sovereign wealth fund, currently valued at $1 trillion, has had varied financial results in recent years, with $4.5 billion losses in 2022, followed by a 24% rise in total revenues for 2023. This latest shrinkage in 2025 has come as PIF governor, Yasir Al-Rumayyan, stated that the fund has plans to reduce foreign investment by at least 20%. This is in a bid to focus more on domestic ventures and funding, as the Kingdom aims to become a global hub for AI in the near future. In addition, the PIF faces growing pressure to prioritise investment towards crucial projects in Riyadh, including for the upcoming World Expo 2030 and the 2034 World Cup.

Key Saudi sectors have been affected by the cuts, including its construction sector, with the total value of large-scale infrastructure contracts dropping by 77% for 2025. Taimur Khan, JLL’s head of research for the MENA region, explained that the slowdown was predictable as the PIF’s giga-projects are ‘coming to more mature levels that don’t need as much spending’. He was positive, though, as he remarked that growth will follow from the real estate sector once the giga-projects are completed.

The PIF has been innovative in its changes as it has launched a commercial paper programme to ensure the diversification of its funding sources. A commercial paper is a debt instrument that offers faster access to funds than traditional loans. This highlights the PIF’s adaptability as it has had to address the fund’s 22% rise in borrowing in the past year. Despite PIF’s losses, Global SWF deems the fund as ‘one of the boldest institutional experiments in sovereign finance’. Global SWF suggested that these setbacks would make the fund more resilient. Indeed, their report revealed that ‘you can’t defy gravity forever’ with high interest rates, volatile oil prices, and wary foreign investors.