Saudi Arabia will set spending limits to prevent an overheating economy that would increase government spending
Saudi Arabia expects to widen the budget deficit this year and next as the world’s largest economy in the Arab increases expenditure to support its economic diversification agenda under Vision 2030.
The kingdom’s deficit will be 118 billion Saudi riyals ($31.46 billion), or 2.9% of its GDP, with revenue expected to be around 1.24 trillion riyals and expenses expected to be about 1.36 trillion riyals.
The expectation for the 2024 budget deficit is higher than the previous estimate of 1.9% as it continues its expansionary economic policy. The kingdom predicts that there will be a GDP deficit of 2.3% due to the total expenses of 1.28 trillion riyals and 1.18 trillion riyals of total revenue in 2025. The latest government data says the budget deficit will be 2.9% in 2026 and 3% in 2027.
The government is still using budgetary resources to diversify the economy through transformative spending, which includes giga projects, sectoral and regional strategies, Saudi Vision 2030 programs, and the regular review of project schedules.
Saudi Arabia will set spending limits to prevent an overheating economy that would increase government spending.
The ministry estimates the kingdom’s overall economic output would grow by 0.8% this year, pushed by a 3.7% increase in the non-oil sector. The economy will expand by 4.7% in 2027, 3.5% in 2026, and 4.6% in 2025.
Saudi Arabia, the highest oil exporter in the world, is working to diversify its economy to substitute its reliance on oil, which generates the majority of its income. Vision 2030 transformation program aims to attract foreign direct investment into the kingdom while expanding its non-oil industrial base and strengthening non-oil revenue streams. Other industries developed are technology, real estate, tourism, and infrastructure.
Saudi Arabia’s Minister of Investment, Khalid Al Falih, said that the Vision 2030 initiative was more than halfway implemented throughout the kingdom.
Since introducing Vision 2030, the GDP has increased by about 70%. At a meeting in London, he stated that they have moved from number 20 on the rankings of the G20 countries to number 16.
Since announcing Vision 2030, their economy has grown at the second-fastest rate among the G20, with an annualized GDP growth of around 7%.
Finance Minister Mohammed Al Jadaan said the country would reduce or accelerate some projects under the Vision 2030 program to adjust to the present geopolitical and economic challenges.
The non-oil growth in the largest economy in the Arab will go up to 4.4% in the medium run after slowing to 3.5% this year, according to a report released by the International Monetary Fund last month. This is due to the higher demand as the kingdom implements its Vision 2030 agenda.
The GDP of Saudi Arabia will grow to 4.7% in 2025 and then maintain 3.7% in the following years, as indicated by the Washington-based lender.
On Monday, Mr. Al Jaadan stated that the government will continue borrowing to repay the debt principle due in 2025 and finance the anticipated budget deficit.
The kingdom is exploring more market opportunities to undertake its funding activities, including alternative government finance.
As a result of the increase in spending to speed up the pace of completing some programs and projects to meet the objectives of Saudi Vision 2030, the volume of the public debt portfolio will grow gradually to maintain debt sustainability.
Saudi Arabia has proven the strength of its fiscal position and the flexibility of its economy, with safe levels of government reserves and acceptable levels of public debt in addition to a flexible spending policy that helps deal with potential future crises. It is despite the slowdown in global economic growth, ongoing economic challenges, and geopolitical tensions.