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Saudi Arabia to boost spending in 2023, GDP growth to slow down

REUTERS/Lucas Jackson
Wooden shutters and balconies adorn the front of a building in the Old City of Jeddah.
  • Non-oil GDP growth is expected to grow 5.9% this year
  • Inflation this year may be about 2.6%

Saudi Arabia expects to post a surplus of 0.2 percent of GDP in 2023, a drop from an expected surplus of 2.3 percent this year, which was revised downwards slightly, a preliminary budget statement showed on Friday, as it boosts spending amid a windfall from oil revenues.

Saudi Arabia expects total revenues at 1.123 trillion riyals ($298.99 billion) in 2023, an estimated 8.1 percent fall from this year, and total spending of 1.114 trillion riyals, the preliminary budget statement for 2023 said.

Projected spending was up nearly 17 percent from spending budgeted for this year, while revenues are expected to be 7.5 percent higher compared with 2022.

In its 2022 budget statement, the finance ministry had expected a budget surplus of 2.5 percent this year and 0.8 percent next year, both revised downwards.

The ministry expects its budget surplus to widen to 0.5 percent of GDP in 2024 and 1.7 percent in 2025, the 2023 preliminary budget showed.

Saudi Arabia’s expected surplus this year would be its first in nearly a decade, as it benefits from sustained high oil prices and higher volumes, as well as a growing non-oil economy.

Surpluses achieved “will be directed to bolstering government reserves, supporting the national funds and considering the possibility of accelerating the implementation of some strategic programs and projects of economic and social dimensions,” as well as to partly repay debt, the ministry said.

Saudi Arabia revised up its expected GDP growth this year to eight percent from a previous forecast of 7.4 percent, before slowing down to 3.1 percent growth in 2023, slightly below a previous projection of 3.5%. Growth was forecast at six percent in 2024 and 4.5 percent in 2025.

Non-oil GDP growth is expected to grow 5.9 percent this year, the ministry said. Inflation this year “may be about 2.6 percent,” the finance ministry said.

The International Monetary Fund has projected GDP growth of 7.6 percent this year for Saudi Arabia.

The government, embarking on an ambitious economic agenda to diversify the economy away from oil, “aims to strike a balance between maintaining fiscal sustainability and accelerating the pace of economic growth,” the ministry said.

The kingdom is increasingly relying on its powerful sovereign wealth fund to drive an ambitious spending push on projects including a collection of lavish Red Sea resorts, a futuristic city in the desert and nearly $40 billion in investments in the gaming industry.

The head of the Public Investment Fund (PIF), which doubled its assets to more than $600 billion in about two years, said in December the fund would spend 1 trillion riyals domestically by 2025.

“The PIF is one of the pillars for economic diversification in the Kingdom, and it continuously aims to invest in several promising areas and sectors,” the ministry said.