Saudi Arabia's budget deficit jumps to $22bn on higher spending

Kingdom is transforming its economy under its Vision 2030 diversification agenda

Saudi Arabia's total revenue dropped nearly 4 per cent in 2023. EPA

Saudi Arabia’s budget deficit reached 80.9 billion Saudi riyals ($21.57 billion) in the 2023 fiscal year, narrower than the government’s previous estimates, as oil revenue dipped amid production cuts.

It came as the kingdom increased its spending to boost the economy, the Ministry of Finance said in a budget update on Wednesday.

The government had in December estimated a deficit of 82 billion riyals for 2023, and predicted a deficit of 79 billion riyals in 2024.

The Arab world’s largest economy reported a budget surplus of over 103.85 billion riyals ($27.68 billion) for the 2022 financial year, amid a surge in crude oil prices.

But it was followed by plummeting oil prices and repeated production cuts throughout the last year pushing the budget into deficit.

The kingdom’s total revenue dropped nearly 4 per cent on a yearly basis to more than 1.21 trillion riyals in 2023. Oil revenue dropped 12 per cent on a yearly basis to 754.56 billion riyals while non-oil revenue surged 11 per cent to 457.72 billion riyals.

Total expenditure for 2023 jumped 11 per cent to more than 1.29 trillion riyals, while total debt stood at 1.05 trillion riyals at the end of 2023, the government said.

Saudi Arabia, the world's biggest oil exporter, is transforming its economy under its Vision 2030 diversification agenda as it aims to reduce its dependence on oil, broaden its non-oil economic base and support domestic industries and job growth.

The kingdom's economy is projected to grow 2.7 per cent this year and 5.5 per cent in 2025, after contracting by an estimated 1.1 per cent last year due to cuts in oil output, according to the latest International Monetary Fund estimates.

The kingdom, which benefitted from the rally in crude prices last year amid the Ukraine war, has cut oil output in an attempt to stabilise the market.

Non-oil economic growth, however, has remained robust on government initiatives as the kingdom opens up various sectors for foreign investment. The kingdom is developing several new projects spanning sectors including property, tourism, entertainment and infrastructure.

Riyadh also enacted a regulation this year requiring multinational businesses to set up a local base or face the risk of losing out on government contracts.

In the fourth quarter of last year, kingdom’s budget deficit jumped 3 per cent on a quarterly basis to 36.99 billion riyals.

Oil revenue increased 28 per cent year-on-year in the October-December period to reach 249.21 billion riyals, while non-oil revenue decreased 12 per cent to 108.77 billion riyals.

Revenues and spending in the last quarter stood at 357.98 billion riyals and 394.97 billion riyals, respectively.

Business activity in the kingdom's non-oil private sector economy remained robust in January, amid continued growth momentum.

The seasonally adjusted Riyad Bank purchasing managers’ index ­– a crucial gauge of the kingdom’s non-oil economy – stood at 55.4 in January.