Saudi 2024 budget forecasts $21bn deficit but GDP set to rise

Saudi Arabia has approved its 2024 budget, which forecasts a deficit of SAR79 billion ($21.1 billion), accounting for 1.9 percent of the country’s gross domestic product (GDP).

The estimated total revenues are SAR1.17 trillion, while total expenditure is forecast to be SAR1.25 trillion, the finance ministry said in a statement.

The kingdom projected a budget deficit of SAR82 billion for 2023. Revenues are expected to reach SAR1.19 trillion, while expenditure will hit SAR1.28 trillion.

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Saudi Arabia’s annual budgets stem from “very conservative” oil revenue estimates, meaning deficits are not due to fluctuating oil prices but a deliberate decision to boost spending, finance minister Mohammed Al-Jadaan said at a budget briefing.

“We actually intentionally decided to spend more and cause the deficit knowingly, consciously,” in the belief that deficits of up to 3 percent are “absolutely fine… if you spend that money right”, Agence France Presse reported, citing the minister.

Capital expenditure is forecast at SAR189 billion, or 15 percent of total spending next year. The budget allocated SAR195 billion for education, SAR214 billion for healthcare and social development, as well as SAR269 for defence in 2024.

Public debt will reach SAR1.1 trillion (25.9 percent of GDP) next year, compared to SAR1.02 trillion (24.8 percent of the GDP) in 2023, a 1.1 percent yearly increase.

The ministry anticipates 4.4 percent real GDP growth next year, compared to 0.03 percent this year.

Inflation will likely decline to 2.2 percent in 2024, compared to 2.6 percent this year.

“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,” said Al-Jadaan.

He added that the government will continue domestic and international fiscal operations to bridge the expected 2024 deficit and repay debt due next year and in the medium term.