Saudi Arabia posts 2023 budget deficit of $22bn

Saudi Arabia posted a fiscal deficit of $21.6bn (SAR80.9bn) in 2023, slightly narrower than government estimates, as total spending increased 11 per cent from the previous year while oil revenue declined.

The world’s top oil exporter had recorded a surplus of almost $30bn in 2022, its first in almost a decade, as crude prices soared. But successive cuts to production for much of last year and a return to lower prices sharply slowed growth and tilted the budget back into deficit.

The government had estimated a deficit of SAR82bn in its December budget statement and is also forecasting a deficit of SAR79bn in 2024.

Total expenditure rose 11 per cent from the previous year to SAR1.29tn in 2023, according to finance ministry data on Wednesday, with capital expenditure, understood to mean infrastructure and other physical assets, up 30 per cent.

“Capex is likely to be the second highest in the region, relative to GDP, after Qatar as the Kingdom invests in infrastructure to support its Vision 2030 objectives,” said Alexander, director at Khalij Economics and Gulf analyst at GlobalSource Partners.

Revenue fell 4 per cent to SAR1.2tn, with a 12 per cent drop in oil revenue offset by an 11 per cent rise in that from non-oil sources.

Saudi Arabia’s development agenda

Saudi Arabia is midway through its Vision 2030 economic transformation plan, putting an expanded private sector and non-oil growth at the centre of its future development agenda.

Non-oil revenue accounted for almost 40 per cent of the total last year, the finance ministry data showed.

In the fourth quarter, the budget deficit stood at SAR37bn, narrowing from a deficit of SAR45.7bn a year earlier but slightly higher than in the third quarter.

Oil revenue jumped 28 per cent year-on-year in the final three months of 2023, helping lift total revenue by 13 per cent to SAR358bn. Spending also increased in the quarter, up 9 per cent to SAR395bn from a year earlier.

The increase in Q4 oil revenue was likely boosted by both Aramco’s additional dividend, linked to performance, since 2022, as well as some payments made in Q3 that entered public revenue with a slight lag, Alexander said.

Last year, Aramco announced it would pay out additional performance-linked dividends on top of its expected base dividend for 2022 and 2023, most of which will go to the government.

The oil sector led a 0.9 per cent contraction in Saudi Arabia’s economy in 2023, although non-oil activities grew by 4.6 per cent.

The kingdom has already tapped debt markets for $12bn this year to help plug the budget deficit as it boosts spending to bolster the domestic economy.

Total debt stood at SAR1.05tn at the end of 2023, the government said.

Read: Saudi Arabia’s real GDP contracts 3.7% Q4 2023