Saudi Arabia forecasts budget deficit of more than $21bn in 2024

Kingdom's Finance Ministry expects 2023 revenue to exceed $318bn

The kingdom's Finance Ministry expects non-oil GDP growth to be 5.9 per cent this year. Reuters

Saudi Arabia on Wednesday approved its general budget for the 2024 fiscal year, which forecasts a deficit of 79 billion Saudi riyals ($21.1 billion), accounting for nearly 1.9 per cent of the country's gross domestic product, the kingdom’s Ministry of Finance said.

The Arab world’s largest economy estimated total revenue at 1.17 trillion riyals next year, while total expenditure is projected at 1.25 trillion riyals, the ministry said in a statement.

“The FY 2024 budget confirms that the government will continue funding and supporting the implementation of programmes, initiatives and economic transformation projects in line with Saudi Vision 2030, while maintaining discipline for fiscal sustainability targets in the medium and long-term,” the ministry said.

The kingdom’s cabinet, chaired by King Salman, reviewed and approved the state’s general budget for the next fiscal year.

He “directed the ministers and officials to actively commit to implementing the development and social programmes and projects included in the budget”, state news agency SPA reported.

The 2024 national budget aims to boost growth in the non-oil economy by increasing spending and investment in infrastructure, local industry and services, Saudi Arabia's Crown Prince Mohammed bin Salman said, as reported by SPA.

He said the government is also working to boost its reserves and maintain a sustainable level of public debt.

The budget’s higher spending for next year aims to boost growth, Prince Mohammed said.

“Despite the ongoing state of uncertainty, global inflation rates are declining at a faster pace than expected, which will improve global economic performance, stimulate investment markets and maintain low unemployment rates, resulting in a positive impact on the kingdom's economy,” Minister of Finance Mohammed Al Jadaan said.

The government will “continue domestic and international fiscal operations to bridge the expected 2024 deficit and repay debt due during 2024 and in the medium-term", he added.

"The government also aims to take advantage of available market opportunities to provide additional financing to repay debt obligations in the coming years.”

The finance ministry said total revenue would reach 1.19 trillion riyals in 2023, with oil revenue expected to remain at 752 billion riyals.

The ministry forecast total expenditure at 1.27 trillion riyals for this year, and expected the non-oil GDP growth to be 5.9 per cent.

Saudi Arabia’s economy, which grew by 8.7 per cent last year, the highest annual growth rate among the world's 20 biggest economies, is expected to expand by 0.8 per cent in 2023, according to the International Monetary Fund.

The kingdom, which benefitted from the rally in crude prices last year amid the Ukraine war, has cut oil output in an attempt to stabilise the market.

The country's economy contracted by 4.5 per cent annually in the third quarter, dragged down by oil production caps.

However, the non-oil economy expanded by 3.9 per cent in the three months to the end of September, according to the General Authority for Statistics data.

The IMF expects the kingdom's non-oil economic growth to remain close to 5 per cent in 2023, spurred by strong domestic demand.

Business activity in the kingdom's non-oil private sector economy remained robust in November, driven by a sharp rise in client orders and output amid continued economic momentum in the kingdom, according to the headline Riyad Bank purchasing managers' index released on Tuesday.

Saudi Arabia's index reading dropped to 57.5 last month, from 58.4 in October, but remained well above the 50-point neutral mark that separates expansion from contraction.

The kingdom's non-oil private sector economy expanded despite an increase in raw material prices that drove up selling rates in November.