Saudi Arabia has reported a budget deficit of 2.91 billion Saudi riyals ($770 million) for the first quarter of the year after spending on the kingdom's economic diversification projects increased.
Expenditure from January to March rose by 29 per cent annually to 283.85 billion riyals, driven by a 75 per cent yearly increase in capital expenditure and a 52 per cent rise in social benefit expenses.
Meanwhile, total revenue during the period grew by 1 per cent annually to 280.9 billion riyals as non-oil revenue rose by 9 per cent, year on year, to 102.3 billion riyals, the Ministry of Finance said on Sunday.
Oil revenue fell 3 per cent annually to 179 billion riyals in the three-month period on lower crude prices.
“At a time when oil revenues decreased slightly, the kingdom’s Vision 2030 programme of supporting the non-oil sector and diversifying sources of income succeeded in playing a prominent role in raising non-oil revenues in the first quarter,” the state-run Saudi Press Agency cited the ministry as saying.
Government reserves stood at 415 billion riyals while the current account balance at the end of the quarter was 35.38 billion riyals.
The deficit was fully funded from external debt, without withdrawing from the reserve, the ministry said.
“This level of deficit does not cause concern in light of the strong financial position of public finances, so there is a great ability to continue the expansionary fiscal policy and consider accelerating projects with an economic return,” it said.
The kingdom posted a budget surplus for 2022 of 102 billion riyals, which was 12 billion riyals higher than predicted figures, mainly on the back of higher oil prices.
“With the kingdom announcing voluntary oil production cuts of 500,000 barrels per day from this month, we expect the budget to be close to balanced this year after recording a surplus in 2022,” Emirates NBD economists said in a research note on Monday.
Saudi Arabia's economy expanded by 3.9 per cent in the first quarter on an annual basis, boosted by growth in its non-oil sector, it said on Sunday.
Non-oil activities grew 5.8 per cent in the first three months of the year compared with the same quarter in 2022, while oil activities rose 1.3 per cent during the period, initial estimates released by the General Authority for Statistics showed.
Meanwhile, government services activities increased by 4.9 per cent annually during the first quarter, the government agency said.
The kingdom is in the middle of a major economic diversification drive under its Vision 2030 agenda, amid a push to reduce its reliance on oil and tap into other high-growth industries to boost its economy, create more jobs and attract private investment.
Saudi Arabia is investing heavily in developing its tourism, hospitality, aviation, logistics, advanced manufacturing and technology industries.
Earlier this month, the kingdom said it was seeking investment worth more than 96 billion riyals in its manufacturing sector as the Arab world’s biggest economy looks to expand its industrial base.
The kingdom has identified 50 investment opportunities as part of its National Industry Strategy, officials said.
In October, Saudi Arabia launched the National Industry Strategy to triple industrial output and increase the value of the country’s industrial exports to about $149 billion by 2030.
The initiative aims to attract investment, boost non-oil exports and grow the kingdom's gross domestic product.