RIYADH, Dec 6 (Reuters) – Saudi Arabia plans to spend heavily as it pushes ahead with mega-projects to boost its non-oil economy, despite long-term oil production cuts and falling oil prices. , expects only a slight decrease in revenue in the 2024 budget. .
Economic growth last year boomed thanks to a huge windfall from soaring oil prices, averaging about $100 per barrel, resulting in the highest GDP growth rate among G20 countries in nearly a decade. This was the first fiscal surplus.
At the end of last year, Saudi Arabia had forecast a fiscal surplus for the second consecutive year in 2023, albeit with a narrower budget surplus, but since then, lower oil production and prices have affected revenue and spending has remained high. , the deficit is back again.
Saudi Arabia’s Finance Minister Mohammed al-Jadaan said in a press conference on Wednesday that the government’s current oil production plans will not affect the projected revenues of the 2024 state budget.
OPEC+ oil producers recently agreed to voluntary production cuts of about 2.2 million barrels per day early next year, and Saudi Arabia has voluntarily cut production by more than 1 million barrels per day.
Saudi Crown Prince Mohammed bin Salman, who is overseeing the kingdom’s economic transformation plan Vision 2030, said the 2024 budget will focus on growing the non-oil economy by increasing spending and investment in infrastructure, local industry and services. The aim is to promote the
The government expects spending to rise in the coming years, which analysts believe will boost domestic growth and support non-oil GDP.
“We expect a budget that will focus on advancing the reform agenda and support a growth environment,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
Gulf countries are in the middle stages of Vision 2030, with hundreds of billions of billions of billions of billions of dollars to wean their economies off hydrocarbon revenues, build massive infrastructure projects to develop sectors such as tourism and industry, and expand the private sector. A dollar investment is required.
Total spending next year is expected to be 1.251 trillion riyals ($334 billion), about 12% more than the 2023 budget, according to finance ministry figures.
Saudi Arabia estimates its total revenue in 2024 to be 1.172 trillion riyals.
Despite Saudi Arabia extending its voluntary oil production cut of 1 million barrels per day for much of this year, total revenue for 2023 is estimated at 1.193 trillion riyals, ahead of the budget announced in September. The statement has been revised upward.
As a result, non-oil GDP growth is estimated at 5.9%, significantly outpacing the economy as a whole even as oil GDP declines, with overall growth remaining roughly flat at 0.03%.
Despite GDP growth expected to recover to 4.4% next year, Saudi Arabia is likely to use debt markets to manage its projected 79 billion riyal budget deficit in 2024, and this is slightly smaller than the 82 billion riyal deficit expected this year.
According to the Ministry of Finance, public debt is expected to reach 1.1 trillion riyals ($294.09 billion) in 2024, equivalent to 25.9% of GDP, from an estimated 1.02 trillion riyals in 2023.
Jadaan told Reuters in October that the government was fully aware of its fiscal space and was not worried about the budget deficit, but was instead focused on accelerating reforms.
“Deficits are not a problem at all,” he said in October. “Deficits are a good thing if you’re using additional spending to grow the economy.”
(1 dollar = 3.7506 riyals)
Additional reporting by Klauda Tanios and Nayela Abdallah in Dubai. Written by Rachna Uppal.Editing: Alex Richardson and Toby Chopra
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