Saudi Arabia is expected to increase public spending next year and expects to post a budget surplus.
The Arab world’s largest economy has estimated government revenue next year at 1.12 trillion Saudi riyals ($298 billion), higher than a previous estimate of 968 billion riyals, and an 18% increase in spending at 1.11 billion riyals, the finance ministry said in its 2023 preliminary budget presentation on Friday.
The estimated surplus of 9 billion riyals ($2.4 billion) next year, lower than an earlier estimate of 27 billion riyals, represents about 0.2% of total gross domestic product (GDP).
The government maintained its forecast of a budget surplus of 90 billion riyals this year, the ministry said.
The economy is expected to grow 8% in 2022 and 3.1% next year, he added.
“Given the changes in the growth outlook and the geopolitical challenges facing the global economy, the fiscal performance demonstrates a tangible improvement in the ability of the kingdom’s economy to weather economic challenges and shocks,” he said. said the Ministry of Finance.
“The proactive structural and fiscal reforms that have been implemented as part of the kingdom’s Vision 2030 are key to achieving high economic growth rates in the current year.”
Saudi Arabia, the world’s top oil exporter, has seen strong economic growth this year on the back of rising oil prices after recovering from the impact of the coronavirus-induced downturn in 2021.
The kingdom’s economy grew by 11.8% in the second quarter of 2022, with oil-related economic activity in the kingdom increasing by 23.1% annually.
Non-oil economic activity improved by 5.4% in the April-June quarter, according to data from the General Statistics Authority (Gastat).
The kingdom’s economy is expected to grow at the fastest pace in a decade and could be one of the fastest growing economies in the world this year, the International Monetary Fund said in August.
It is expected to rise 7.6% this year after rising 3.2% in 2021, the IMF said in its World Economic Outlook update in July.
The World Bank estimates that the country’s economy will grow by 7% this year, while Jadwa Investment expects it to grow by 7.7% in 2022.
Oil prices have risen sharply this year after the Russian-Ukrainian conflict began in February, amid growing concerns about supply constraints. However, prices fell on fears that a potential recession could dampen global demand.
Business conditions in the kingdom’s non-oil private sector also continued to improve thanks to the growth of new businesses, according to the latest data.
Saudi Arabia’s seasonally adjusted S&P Global Purchasing Managers’ Index rose to 57.7 in August from 56.3 in July, the highest level since October 2021, as new business growth peaked in 10 months.
Saudi Arabia is budgeting for Brent oil at around $76 a barrel next year, according to Al Rajhi Capital, a local investment bank.
“For 2023, we believe oil revenue could reach 754 billion riyals and non-oil revenue 417 billion riyals,” said Mazen Al Sudairi, head of research at Al Rajhi Capital.
“Based on our assessment, the government’s budgeted revenue for 2023 is likely based on an assumption of Brent at around $76 a barrel.”
The finance ministry said it was “basing the oil and non-oil revenue estimates in the budget on conservative standards in anticipation of any developments that may occur in the national and global economy.”
Meanwhile, inflation in Saudi Arabia is expected to be 2.6% and 2.1% in 2022 and 2023, respectively.
“The private sector continues to lead economic growth and its contribution to increased job creation in the labor market,” the ministry said.
“The government’s continued efforts to diversify the economy will help boost non-oil revenues.
The government has revised the spending forecast for 2022 to 1.13 billion riyals from 955 billion previously announced, due to which the expected budget surplus is lower than the earlier expectation of 293 billion riyals, according to Al Rajhi Capital.
“We view this as a positive sign as higher spending will support economic growth.”
Updated: October 01, 2022, 08:57