Riyadh, Saudi Arabia.
Xavier Lanno | Electronic+ | Getty Images
Saudi Arabia has lowered its growth forecast and raised its budget deficit forecast for fiscal years 2024 to 2026, with spending expected to rise in the coming period and oil revenues expected to fall.
According to the latest pre-budget report released by the Ministry of Finance on Monday, actual gross domestic product is expected to grow by 0.8% this year, a sharp decline from the previous forecast of 4.4%. The GDP growth forecast for 2025 was also lowered to 4.6% from the previous forecast of 5.7%; while the outlook for 2026 was lowered to 3.5% from 5.1%.
預算前報告寫道：“2025 財政年度預算強調了沙烏地阿拉伯加速監管和結構改革以及政策制定的承諾。” “它還注重變革性支出，以促進可持續經濟成長、改善社會發展和提高生活quality.”
The latest report further emphasizes that the Saudi government plans to deploy sovereign and development funds “for capital investment while empowering the private and non-profit sectors to promote growth and prosperity.”
Saudi authorities also expect the budget to continue running deficits in the coming years as the kingdom prioritizes spending to meet the goals of its Vision 2030 plan to modernize the kingdom's oil-heavy economy. and diversity.
The Treasury Department expects the budget gap to widen to about 2.9% of GDP in 2024, compared with the previous forecast of 1.9%. It projects deficits of 2.3% and 2.9% in 2025 and 2026 respectively, also higher than previous estimates.
Saudi Arabia's fiscal breakeven oil price – the barrel of crude oil it needs to balance its government budget – has risen in recent months and years and is likely to move higher as spending increases.
The latest forecast released by the International Monetary Fund in April shows that the fiscal breakeven point in 2024 will be US$96.20, an increase of about 19% from the previous year. The figure is also about 36% higher than the current price of a barrel of Brent crude, which was trading around $70.70 as of Tuesday afternoon.
Oil prices are expected to remain subdued at least in the medium term as global demand slows and supplies increase.
Saudi Arabia is hosting major international events that require significant spending (such as the 2034 World Cup and the 2030 World Expo) and building multi-trillion dollar mega-projects such as Neom, which are funded by public investment from the country's massive sovereign wealth fund Fund support.
Tarik Solomon, chairman emeritus of the American Chamber of Commerce in Saudi Arabia, said: “Saudi Arabia’s GDP dances to the beat of oil, and based on recent Treasury Department data, it’s clear that as oil “But when the wells slow down, so does the growth. “
According to the International Monetary Fund, Saudi Arabia’s public debt has grown from around 3% of GDP in the 2010s to around 28% today – a huge increase, but still low by international standards . For example, the average public debt of EU countries is 82%. In 2023, the US figure is 123%.
Its relatively low debt levels and high credit rating make it easier for Saudi Arabia to take on more debt if needed. Saudi Arabia has also introduced a series of reforms to promote and reduce foreign investment risks and diversify revenue sources. Although the country's economy has shrunk for four consecutive months, non-oil economic activity increased by 4.4% annually in the second quarter, an increase of 3.4% from the previous quarter.
