MENA Strategic Bulletin – KSA liberalises markets amid fiscal pressure; Morocco’s Gen Z protests resume

By Alice Gower and Amy Stapleton

Saudi Arabia eases foreign ownership rules in response to widening deficit

Saudi Arabia’s Ministry of Finance this week doubled its 2025 deficit forecast to about SAR 245bn ($65.3bn), or over 5% of GDP, amid weaker hydrocarbon receipts and reduced Aramco dividend remittances. Despite these headwinds, GDP growth remains positive, supported by large-scale public investment and non-oil expansion. Yet the sustainability of the Kingdom’s state-led model is increasingly in question, and the imbalance between spending ambitions and revenue realities is becoming hard to ignore.

The Kingdom’s economic engine continues to rely heavily on the Public Investment Fund (PIF) and other government-backed entities to drive diversification projects and anchor domestic investment. These institutions have financed much of the infrastructure, tourism and industrial development central to Vision 2030. However, with oil trading near $66 per barrel – far from the $96 per barrel cited as the Kingdom’s fiscal break-even price and much below the $113 per barrel required if PIF domestic investment is included – the fiscal burden on the state is mounting.

To relieve pressure, the government this week introduced liberalisation measures aimed at unlocking private and foreign capital – most notably, relaxing the existing 49% foreign ownership cap on listed companies and expanding real estate access for non-Saudis, particularly in Riyadh and Jeddah. In addition, Crown Prince Mohammed bin Salman announced a five-year rent freeze in the capital to curb rapid price escalation and rebalance the real estate market.

Reports this week also suggest the Ministry of Finance is in talks with major banks to raise $10bn in loans – an unusual move for the Kingdom – as part of plans to explore alternative financing options.

Regional and stakeholder impact

Financial markets reacted positively to the liberalisation drive, with the Tadawul index jumping nearly 5% after the Capital Market Authority announced its plans to ease foreign ownership restrictions. The move signals a clear attempt to deepen liquidity, attract passive inflows and reduce dependence on sovereign spending.

However, it is uncertain whether these inflows will materialise at scale. The rule change could unlock more than $10bn in foreign capital – but persistent concerns about expensive valuations, challenges in creating or exiting large positions, and relatively inexperienced management of investor relations will remain. Foreigners only hold 11% of the entire market at present, and international investors continue to weigh opportunities against structural risks, such as a state-dominated business environment that can change direction quickly.  Without greater regulatory predictability and independent capital allocation, the hoped-for diversification of financing sources may fall short.

For Saudi youth, many of whom entered the labour market during boom-time and have tied their aspirations and careers to Vision 2030, an economic downturn will be a shock. The recent decree to freeze commercial and residential rents in the capital is an attempt to address cost-of-living pressures among young Saudis and new households and pre-empt further financial pain. This measure demonstrates the importance of sustaining public confidence in reform momentum while contending with economic realities. Plans to expand the programme to other regions in the Kingdom are under discussion.

What’s next

Saudi Arabia’s immediate challenge is to transition from a state-funded to a genuinely mixed economy without losing reform momentum or social confidence.

Over the next year, Riyadh is likely to accelerate the pace of regulatory reform and capital market integration to reassure foreign investors. However, if oil prices remain subdued and private and foreign capital inflows disappoint, fiscal consolidation will become inevitable. This would test the resilience of the economic model and cause some of the public to call into question the sustainability of the Vision 2030 project. Cutting subsidies, trimming state spending or curbing public sector hiring each carry social and political risk, particularly with a generation expecting continuous progress.

Morocco’s Gen Z protests resume ahead of Royal address

In Morocco, youth-led protests under the banner “Gen Z 212” resumed on Thursday after a brief tactical pause, which movement organisers said was intended to “reorganise and plan for greater effectiveness” ahead of a royal address to parliament on Friday. The protests began in late September after eight women died in a public hospital in Agadir, triggering outrage over deteriorating public services and widening social inequality.

The movement – which consists mostly of minors and young people in their 20s – has since spread to more than 20 regions of Morocco, including Rabat, Casablanca, Tangier, and towns in the Souss and southern regions. While initially peaceful, violence erupted on October 1 in Leqliaa, where police gunfire reportedly killed at least two people amid clashes near a gendarmerie post; a third protester later died of his injuries. In an open letter to King Mohammed VI, Gen Z 212 urged the monarch to dissolve the government, release detained protestors and convene a national accountability forum.

Regional and stakeholder impact

The mobilisation in Morocco is significant for several reasons: it is the largest since the Arab Spring–era February 20 movement and the most violent since the 2016–17 protests in the Rif region. Its scale and character also set it apart: by coordinating decentralised, youth-led networks mainly via Discord, TikTok, and Instagram, Gen Z 212 has produced rapid, simultaneous turnouts across the country – catching the authorities off guard. While the movement is not seeking to overturn the political order, it has created sustained pressure on the government to address longstanding youth grievances.

Prime Minister Aziz Akhannouch has pledged responsiveness and readiness for dialogue “within institutions” but protestors’ grievances are structural and not easily resolved. Jobs and opportunities top youth concerns. Although those under 35 – who make up around half of the population – are central to the country’s national development strategy, job creation has failed to keep pace with demographic growth. In 2025, the youth unemployment rate rose to around 38% from 36%, and one in three young people are not in education, employment or training.

Demonstrators argue that government spending priorities, notably the government’s $5bn-6bn FIFA World Cup 2030 programme, neglect the needs of citizens and they accuse the government of corruption linked to state-led projects.

Current reform efforts, such as meeting targets for job creation and commitments to increase social protection spending, have been described as slow, piecemeal or insufficiently ambitious relative to the scale of youth frustration. Morocco’s government therefore faces the dual challenge of de-escalating unrest while convincing disillusioned youth of its commitment to addressing their concerns.

What’s next

King Mohammed VI’s address on October 10 will be read as a key indicator of the state’s commitment to addressing youth concerns and is likely to determine whether the protests continue, escalate, or subside. The government is likely to make a firm commitment to at least partial reforms – though whether tangible improvements will follow is far from certain.

Gen Z 212’s call for the King to dissolve the government is unlikely to be met. While the King technically retains this power under the 2011 constitutional reforms, such a move would require broader agreement from the parliament and risks undercutting the monarchy’s post-2011 strategy of controlled reform and institutional integrity.

As Morocco prepares for its September 2026 parliamentary elections to choose members of the House of Representatives, youth concerns are expected to feature prominently in political debate. Opposition parties will seek to capitalise on the opportunity to translate youth activism into votes at the ballot box. The elections may also prove a focal point for renewed protest if youth perceive government reforms to be insufficient.

The Gen Z movement has proven to be a powerful force for change in a number of contexts and protests may spread to other countries as they did during the Arab Spring.  For now, it looks like they will stay within Morocco.

In neighbouring Algeria, there were reports in early October of anonymous online accounts calling for protests under the hashtag “GenZ213” (Algeria’s international dialling code); however, the protests did not materialise. Youth grievances are arguably higher than in Morocco; however, the Algerian state is far less tolerant of dissent, as demonstrated by its response to the Hirak movement of 2019.