Saudi Arabia cuts spending to rein in stimulus

As its private sector continues to recover Saudi Arabia is reining in stimulus measures by cutting its expenditure next year.

Saudi Arabia has cut in half its expenditure rise for next year in an effort to start to rein in stimulus measures as the private sector revives.

Nonetheless, the 580 billion Saudi riyals (US$155bn) of spending is still far higher than most other global governments can afford.

"A slowdown in the pace of budget growth signals the state's goal to rein in overspending and employ more prudent and efficient fiscal policies in the coming years," said John Sfakianakis, chief economist at Banque Saudi Fransi.

The budget marks a more measured pace of spending than in previous years. In the seven years to this year, annual budget expenditure grew by more than 10 per cent in all but one year.

Next year, the lions share of the 7.4 per cent spending rise will go towards infrastructure, health, education and training, under the budget approved by the Council of Ministers on Monday.

Officials have budgeted to plunge into a deficit for the third year in a row. A deficit of 40bn Saudi riyals is projected, based on an estimated break even oil price of $58 a barrel.

Nevertheless, strong oil prices may ensure the budget remains balanced. Saudi Arabia beat analysts forecasts by posting a healthy budget surplus of 108.5 billion Saudi riyals this year, according to preliminary estimates released in the budget report.