Saudi Arabia sets 2020 budget with plans to spend 1.02 trillion riyals
Deficit set to widen to 187 billion riyals, or 6.5 per cent of GDP as kingdom looks to support non-oil growth
Saudi Arabia, the Arab world's largest economy, will spend 1.02 trillion riyals as part of its budget for 2020, King Salman announced on Monday.
The kingdom, the world’s largest crude exporter, also forecast revenues of 833 billion riyals (Dh816bn), meaning that it expects to run a deficit of 187bn riyals or about 6.4 per cent of gross domestic product in 2020, up from 131bn riyals, or 4.7 per cent in 2019. The deficit will be financed by foreign and local bond issuance, according to finance minister Mohammed Al Jadaan.
The spending target for 2020 is slightly lower than the expenditure the kingdom forecast this time last year, but the bigger deficit shows the kingdom is continuing to invest in developing non-oil sectors of the economy, including tourism, entertainment, manufacturing and construction in line with ambitious plans to overhaul the oil-dependent economy.
"We are determined - with Allah's help - to continue implementing economic reforms, diversifying sources of income, including investing proceeds of Saudi Aramco by the Public Investment Fund, optimising the use of available resources, empowering the private sector, and raising the level of transparency and efficiency of government spending to boost growth and development rates," King Salman said in a speech published by Saudi Press Agency.
Saudi Aramco's shares will begin trading on the Saudi stock exchange, the Tadawul, on Wednesday after raising $25.6bn in the world’s biggest initial public offering.
The budget figures announced on Monday are in line with the pre-budget statement issued by the Saudi Ministry of Finance on October 31, when it forecast a marginal reduction in spending compared with 1.048tn projected in 2019 with a view to eventually reducing expenditure down to 955bn riyals by 2022.
"The Public Investment Fund should help shore up some of the shortfall in government spending from the proceeds of the Aramco IPO," Jaap Meijer, head of research at Arqaam Capital said at the time of the pre-budget announcement.
The anticipated revenue figure of 833bn riyals is lower than the 917bn estimated for 2019. Revenues for the current fiscal year have grown 1.2 per cent compared to 2018.
Opec and its allies last week pledged to make additional oil production cuts for the first three months of next year, with Saudi Arabia volunteering greater output restraint. In Vienna they pledged to cut 2.1 million barrels per day from global oil markets from January of next year, deepening their current restrictions as they look to rebalance oil markets.
Updated: December 11, 2019 06:30 PM