Saudi Arabia raised its fiscal surplus estimates for this year and 2023, reflecting the kingdom's confidence in its economic reform programme that has been strengthened by higher oil prices.
The kingdom's approved 1.114 trillion riyals ($296 billion) budget for 2023 now forecasts a surplus of 16 billion riyals, equal to 0.4 per cent of gross domestic product. This compares with a previous surplus estimate of 9 billion riyals announced in a pre-budget statement three months ago.
Total revenue is projected to reach 1.13 trillion riyals, compared with an estimate of 1.12 trillion riyals. The government maintained its earlier expenditure guidance estimate of 1.11 trillion riyals in 2023.
Government reserves are expected to reach about 399 billion riyals by the end of 2023.
Saudi Arabia's preliminary estimates for 2023 indicate a real GDP growth rate of 3.1 per cent, with inflation projected at 2.1 per cent, said Saudi Finance Minister Mohammed Al Jadaan. The kingdom's inflation rate for this year is about 2.6 per cent.
The kingdom will continue spending on major projects and programmes related to its Vision 2030 economic transformation plan that seeks to diversify the economy and reduce its reliance on hydrocarbons, Saudi Crown Prince Mohammed bin Salman said, according to a Saudi Press Agency report.
For 2022, the government has slightly revised its fiscal surplus estimate to 102 billion riyals ($27 billion), equivalent to 2.6 per cent of GDP, from an earlier forecast of 90 billion riyals, after high oil prices boosted revenue, leading to the first fiscal surplus since 2013.
It now estimates 1.23 trillion riyals of revenue this year, compared with an earlier forecast of 1.22 trillion riyals. Saudi Arabia maintained its earlier spending guidance of 1.13 trillion.
The Arab world's largest economy is now expected to grow 8.5 per cent this year, Prince Mohammed said. Its expansion is among the highest in the world.
“The economic recovery, financial control initiatives and policies, and the development and efficiency of public finance management contributed to achieving a surplus in the budget, while maintaining the achievement of the main objectives of the vision, as the surplus is expected to reach about 2.6 per cent of the gross domestic product in 2022,” Prince Mohammed said.
The government will direct spending from the surplus to boost government reserves, support national funds, strengthen the kingdom's financial position and strengthen its ability to face global shocks and crises, he said.
Economic and structural reforms being put in place since the launch of the kingdom's Vision 2030 plan have helped to improve the country's financial and economic indicators, with GDP growth in the third quarter of 2022 coming in at 10.2 per cent.
“There were some limited changes for the 2023 budget from the pre-budget statement, notably with a modestly higher revenue assumption,” said Monica Malik, chief economist of Abu Dhabi Commercial Bank.
“The budget sees a modest reduction in spending, though the economic impact is expected to be limited, especially with the Public Investment Fund driving much of the investment activity. We see strong underlying economic momentum driven by the investment plans in 2023. The higher oil price environment provides space for the government to focus on maintaining fiscal suitability.”
ADCB estimates the 2023 budget could be based on an oil price of around $78 to $80 a barrel. However, the lender expects a higher oil price assumption of $95 a barrel for Brent crude in 2023. Emirates NBD assumes the budget is based on an oil price forecast of around $75 per barrel, while Al Rajhi bank assumes an oil price of $78 per barrel.
The expansion of the Saudi economy has helped reduce unemployment among citizens to 9.7 per cent in the second quarter of 2022, the lowest over the past 20 years, Prince Mohammed said. Unemployment at the end of 2021 stood at 11 per cent.
More than 2.2 million Saudi citizens work in the private sector, the highest in the kingdom's history, while the number of women in the workforce has increased to 35.6 per cent, from 17.7 per cent, he said.
The kingdom's national strategy for industry aims to develop an industrial business environment and double the value of industrial exports to 557 billion riyals while attracting 1.3 trillion riyals of investment into the sector, Prince Mohammed said.
Government debt is expected to increase to 985 billion riyals in 2022 (equivalent to 24.9 per cent of GDP), from 938 billion riyals in 2021, and then fall to 951 billion in 2023 (equivalent to 24.6 per cent of GDP).