© Reuters. FILE PHOTO: A Muslim pilgrims shop in Mecca, Saudi Arabia July 5, 2022. REUTERS/Mohammed Salem
By Rachna Uppal, Aziz El Yaakoubi and Yousef Saba
RIYADH (Reuters) – Saudi Arabia is expected to post a second consecutive budget surplus in 2023, albeit down 84% from this year due to an uncertain global economic outlook and oil prices. Lower may affect revenue.
The kingdom approved a budget of 1.114 trillion riyals ($296 billion) for 2023 on Wednesday, forecasting a surplus at 0.4% of gross domestic product (GDP), down from the expected 2. .6% in 2022, Saudi media reported.
Revenue is expected to reach 1.13 trillion riyals, down from 1.234 trillion riyals in 2022 as oil prices could fall from this year’s highs.
The kingdom projects a budget surplus of 102 billion riyals this year, an upward revision from the 2.3% GDP expected in its pre-budget report in September.
After oil prices plunged as a result of the pandemic, Saudi Arabia pledged to rein in fiscal restraint, although this year it has ramped up spending to offset inflation for some of its citizens.
The government is also directing massive off-balance sheet state spending, primarily through the kingdom’s sovereign wealth fund, PIF, which is pushing its ambitious “Vision 2030” program to remove the economy from oil.
Total spending is estimated at 1.114 trillion riyals in 2023, slightly below 1.132 trillion riyals this year.
GDP growth is forecast to slow to 3.1% in 2023 from 8.5% this year, up 0.5 percentage points from the pre-budget forecast. According to Al Arabiya TV, public debt will fall by 3.5% to 951 billion riyals next year.
Higher oil prices have helped Saudi Arabia’s fiscal balance tilt to a surplus this year. However, the surplus was smaller than the 5.5% GDP forecast by the International Monetary Fund (IMF) in an August report.
The kingdom does not disclose oil prices based on its budget. The IMF estimates the kingdom’s financial breakeven oil price at $73.3 a barrel this year and $66.8 a barrel next year.
With foreign direct investment – a key pillar of Crown Prince Mohammed bin Salman’s “Vision 2030” economic agenda – lagging for years, the PIF’s credibility has only grown.
Analysts say that with modest investment by the local private sector and foreign investors, there is no substitute for PIF’s huge outlay, including building a city of the future. worth $500 billion in the desert.
PIF, which has doubled its assets to more than $600 billion in about two years, has committed to spending 3 trillion riyals in new sectors over the next 10 years, including $40 billion a year in domestic for to 2025.
The wealth fund and the institutions it owns or controls will continue to raise debt through banks and the mass market as their funding needs grow, analysts say.
($1 = 3,7600 riyals)