Global Economic Landscape

The global economy enters 2025 facing a complex mix of challenges and opportunities. UBS forecasts significant monetary policy shifts, with expectations of the US Federal Reserve implementing a 100 basis points rate cut. The bank projects US inflation to settle at 2.6%, while Eurozone inflation is expected to decrease to 2.1%.

Goldman Sachs presents a cautiously optimistic outlook, forecasting US GDP growth of 2.5% - the highest among advanced economies. The bank anticipates US interest rates to decline to 3.25-3.50%, Eurozone rates to fall to 1.75%, and Japanese rates to rise to 0.75% by year-end.

JP Morgan's analysis suggests continued monetary easing through Q1 2026, with rates reaching 3.5%. The bank maintains a positive outlook on the US labor market, projecting stable unemployment at 4% and monthly job growth between 100,000-150,000.

Saudi Market Prospects

The Saudi market shows promising potential for 2025, supported by various growth catalysts. According to AlJazira Capital, the Tadawul All Shares Index(TASI.SA) is expected to reach 12,741 points, representing a 5% increase from the close of January 12, based on an anticipated P/E ratio of 18.5x.

The Saudi economy is projected to grow by 4.6% in 2025, as reported by AlJazira Capital, driven by increased oil production and non-oil sector expansion. Despite budget constraints, the kingdom's low debt levels, robust foreign exchange reserves, and dollar-pegged currency provide significant economic resilience.

Sector Opportunities

Technology and Digital Transformation

Financial advisor Khalid Al-Zaidi highlights the technology sector as a key beneficiary of government support for digital transformation initiatives under Vision 2030.

Arabian Internet and Communications Services Co.(7202.SA) (solutions) stands out among AlJazira Capital's top picks in this space.

Banking and Financial Services

AlJazira Capital maintains an "Overweight" rating on major banks, including Al Rajhi Bank(1120.SA) (target price: SAR 102.00) and Alinma Bank(1150.SA) (target price: SAR 35.50). The sector is expected to benefit from anticipated interest rate reductions in 2025.

Energy and Oil Markets

Goldman Sachs projects Brent crude prices to trade between $70-85 per barrel in 2025.

Saudi Arabian Oil Co.(2222.SA), which AlJazira Capital rates as "Overweight" with a target price of SAR 32.10, is expected to generate a net profit of SAR 452.7 billion in 2025.

Telecommunications

The telecommunications sector shows strong potential, with AlJazira Capital giving "Overweight" ratings to Saudi Telecom Co.(7010.SA) (target price: SAR 45.50) and Etihad Etisalat Co.(7020.SA) (target price: SAR 62.60). stc is projected to achieve profits of SAR 13.7 billion in 2025, while Mobily is expected to reach SAR 2.87 billion.

Tourism and Entertainment

Al-Zaidi identifies tourism and entertainment as key growth sectors, supported by significant investments in mega projects such as NEOM, The Red Sea, and Qiddiya. Seera Group Holding(1810.SA), rated "Overweight" by AlJazira Capital with a target price of SAR 29.20, is positioned to benefit from this trend.

Renewable Energy

Financial advisor Khalid Al-Zaidi identifies renewable energy as a key growth sector for 2025, citing the sector as a primary beneficiary of Saudi Arabia's sustainability initiatives under Vision 2030 and ongoing government support for clean energy projects.

Insurance

According to analysts polled in the market survey, the insurance sector is positioned as one of the key sectors with significant growth opportunities in 2025. Their optimistic outlook is supported by expectations of continued government spending and the anticipated decrease in interest rates to 3.9%.

Consumer and Retail

The retail sector shows promise, with companies like United Electronics Co.(4003.SA) (eXtra) receiving an "Overweight" rating from AlJazira Capital (target price: SAR 111.00). The firm is projected to achieve profits of SAR 550 million in 2025. Other notable retail companies under coverage include Jarir Marketing Co.(4190.SA) (Overweight, target price: SAR 16.50) and Almarai Co.(2280.SA) (Neutral, target price: SAR 62.00).

Car Rental

Market analysts surveyed by leading financial institutions have identified car rental as a key growth sector for 2025. This positive outlook is reinforced by AlJazira Capital's analysis, which includes Theeb Rent a Car Co.(4261.SA) among their top stock picks for the year.

Investment Considerations

Portfolio Manager Youssef Costantini at Watheeq Capital emphasizes the need for careful consideration of global factors, including the US national debt exceeding $36 trillion and potential inflationary pressures from ongoing geopolitical tensions.

Merrill Lynch and HSBC recommend maintaining gold exposure for portfolio diversification, particularly given the monetary easing cycle and geopolitical uncertainties. Amundi projects gold prices to average $2,800 per ounce in 2025. Related assets: Albilad Gold ETF(9405.SA), Gold Trust Ishares(IAU.US), SPDR Gold(GLD.US).

Market Risks

A SICO Bank survey identifies key risk factors for 2025, with geopolitical concerns leading at 54.8%, followed by interest rate, inflation, and recession risks.

Economic writer Tarek Al Madi emphasizes the importance of monitoring new IPO momentum (Tadawul IPO Index  (Capped)(TIPOC.SA)) while maintaining market stability. The Saudi market is expected to continue attracting new listings, supporting market depth and sector diversification in alignment with Vision 2030 objectives.

The opinions expressed by the institutions and analysts mentioned above are based on market reports and may represent their independent views, which could be subjective or incomplete. This information is provided to investors as a potential direction for further exploration and does not constitute financial advice.