Saudi Arabia predicts budget deficit as it revises oil-dependent spending plan

According to an announcement by the finance ministry on Saturday, Saudi Arabia has adjusted its budget projections, anticipating a deficit for the year. This change is attributed to increasing expenses and declining oil revenues.

The Gulf kingdom, known as the world’s largest crude exporter, initially aimed for a surplus of 16 billion Saudi riyals ($4.27 billion) in 2023. However, a recent update in the ministry’s pre-budget statement reveals a significant shift in projections, now forecasting a deficit of 82 billion Saudi riyals ($21.86 billion), equivalent to two percent of the GDP.

According to the statement, there is an anticipated deficit of 79 billion riyals, which amounts to 1.9 percent of the GDP for the upcoming year.

Saudi Arabia in December announced it had recorded its first annual budget surplus in nearly a decade, benefiting from oil price hikes that resulted from Russia’s invasion of Ukraine.

Oil revenue this year has fallen by 17 percent as prices have dipped and Riyadh has cut production in a bid to boost them.

Daily output is currently nine million barrels per day, down two million barrels from this time last year.

Saudi Arabia is also pursuing an ambitious and expensive Vision 2030 reform programme spearheaded by Crown Prince Mohammed bin Salman that intends to shift the economy away from fossil fuels.

Saturday’s statement touted growth in non-oil sectors, whose revenue jumped by 11 percent in the first half of the year.

Saudi Finance Minister Mohammed al-Jadaan said the government “will continue implementing fiscal and economic structural reforms to help develop and diversify the Saudi economy, and to increase economic growth while maintaining fiscal sustainability”.

The ministry currently expects budget deficits to last through 2026, the statement said.