Saudi Arabia Lowers Economic Growth Forecast for 2023, Expects Budget Deficit
In a mid-year budget report released by the Saudi Ministry of Finance on Saturday, it was revealed that Saudi Arabia has revised its economic growth forecast for this year and expects to run a budget deficit instead of the fiscal surplus predicted earlier. This comes as a result of various economic factors and challenges faced by the country.
According to the report, Saudi Arabia, the largest Arab economy, now anticipates a real gross domestic product (GDP) growth of only 0.03% this year, compared to the previous forecast of 3.1% growth mentioned in the fiscal budget report at the beginning of the year. The government predicts a deficit of 82 billion rials ($22.14 billion) in 2023, accounting for approximately 2% of GDP, instead of the expected surplus of 16 billion rials.
Looking ahead to 2024, the Saudi government expects total revenue to be 1.172 trillion riyals ($312.51 billion) with total expenditure of 1.251 trillion riyals, indicating that a fiscal deficit will still persist. Previous estimates had placed revenue at 1.130 trillion riyals and expenditures at 1.114 trillion riyals for this year.
Despite this, Saudi Arabia remains optimistic about its economic future. The report foresees real GDP growth of 4.4% in 2024, 5.7% in 2025, and 5.1% in 2026. However, the report also warns that “limited budget deficits” will continue due to expansionary spending policies and conservative revenue estimates.
The drop in oil prices since the second half of last year has had a significant impact on Saudi Arabia’s economy. In response, the country has implemented measures to protect oil prices, including reducing oil production. This has contributed to the revised economic forecast.
Commenting on the changes, Alrajhi Capital noted that increased government spending is being driven not only by rising revenue but also by increasing debt levels. They expect non-oil revenue to reach SAR 440 billion, higher than their previous estimate, due to the growth of non-oil GDP. The International Monetary Fund (IMF) also predicts that Saudi Arabia’s non-oil GDP growth will remain above 4%, supporting increased government spending.
The Saudi government’s move to accelerate spending is seen as part of its efforts to achieve the goals outlined in Vision 2030. Alrajhi Capital believes that the government will be able to maintain healthy reserve levels by increasing non-oil revenue and leveraging borrowing.
Despite the challenges presented by the revised economic forecast, Saudi Arabia remains committed to implementing its economic reforms and diversifying its economy beyond reliance on oil revenue. The government’s support for increased spending reflects its dedication to achieving the goals outlined in the Vision 2030 plan.
This article is sourced from the Financial Associated Press and published by Oriental Fortune. Readers are advised to assess the information at their own risk as it does not constitute investment advice. The content published here is solely for informational purposes and does not reflect the position of Oriental Fortune.