Saudi Arabia expects deficit of 2.9% of GDP in 2024

Saudi Arabia forecasted a fiscal deficit of 2.9 per cent of GDP in 2024, data from the Ministry of Finance showed on Monday, as the kingdom increases spending to boost growth and meet the objectives of its Vision 2030 economic transformation plan.

The Gulf state expects to post a fiscal deficit of $32bn (SAR118bn), wider than the SAR79bn projected in the 2024 budget statement last December.

The finance ministry projected a budget shortfall of as much as 2.3 per cent of GDP in 2025 and 2.9 per cent in 2026 – more than previously estimated.

Saudi Arabia slashed its growth forecasts. Economic output is now seen growing at 0.8 per cent in 2024, down from a prior forecast of 4.4 per cent. The Arab world’s biggest economy also scaled back growth forecasts for 2025-2026.

“The government is pressing forward with its reforms to meet the objectives of Saudi Vision 2030, which is reflected in the budget of 2025 and over the medium term,” the finance ministry said in a statement, adding that the kingdom seeks to accelerate spending “on specific projects and strategies in targeted sectors.”

Saudi Arabia slightly increased revenue projections for 2024 but slashed its view for each of the next two years. Total revenue is expected to be SAR1.24tn, and government spending is estimated at SAR1.36tn this year, compared to last December’s estimates of SAR1.17tn and SAR1.25tn, respectively.

The kingdom projected revenues of SAR1.18tn and expenditures at SAR1.29tn in 2025, with spending likely to equate to about 30 per cent of GDP over the next three years.

Saudi Arabia, which needs oil prices at $96 a barrel to reach equilibrium in its finances, will continue borrowing activities to its budget deficit next year.

Meanwhile, foreign direct investment (FDI) into Saudi Arabia stalled in the second quarter of the year at around the same level as a year ago, with inflows amounting to $9.7bn in the January-June period, according to the General Authority for Statistics.

FDI is a key element of Vision 2030, an economic diversification strategy that seeks to boost non-oil growth, expand the private sector, and create jobs. Saudi Arabia has set a goal of attracting $100bn in foreign investment inflows by 2030.

Read: S&P revises Saudi Arabia’s outlook to positive on strong non-oil economy