ECONOMIC TRENDS

Saudi Arabia’s real GDP growth will leap by 7.4% in 2022 buoyed by a spate of fiscal reforms at home and an economic rebound globally, according to the government’s latest forecast.

The Saudi Ministry of Finance’s fiscal budget for 2022 expects the economy to be in a strong position in the new year, underpinned by three key pillars.

“The first pillar is ensuring fiscal sustainability through diversification of revenue sources and raising expenditure efficiency,” the ministry said.

“The second pillar is enabling the private sector through programmes that target enhancing the sector’s productivity and its contribution to the national economy, in addition to the projects and programmes executed by the development funds.”

The third pillar is the implementation of broader structural transformations, with economic and social dimensions, to enhance the agility of the economy and its ability to keep pace with the rapidly changing global landscape.

“The financial and economic results and indicators confirm that we are progressing positively, as next year's budget comes amid a global climate characterised by great challenges in light of the repercussions of he (COVID-19) pandemic, and great local ambitions, but in a financially disciplined framework that focuses on the efficiency and effectiveness of directing government spending and utilising available resources to achieve the best return from them, while maintaining financial stability as a fundamental pillar of sustainable growth,” according to His Royal Highness Prince Mohammed bin Salman bin Abdulaziz Al Saud, Crown Prince, deputy prime minister and chairman of the Council of Economic and Development Affairs.

The government estimates that it will be able to reverse the budget deficits of the past few years and post a budget surplus of SAR 90 billion in 2022, or 2.5% of the country’s GDP. The government also forecasts a small budget surplus in 2023 and 2024

In addition, authorities expect revenues in 2022 to surge past SAR 1 trillion, with “other revenues” accounting for two-thirds of total revenues.

“Other revenues, which include oil revenue, returns on government investments, sales of goods and services, as well as sanctions and fines, are estimated to reach roughly SAR 763 billion for FY 2022, an increase of 20% compared to expected revenue in FY 2021,” the Ministry of Finance noted.

Total expenditure, meanwhile, is seen reaching SAR 955 billion, resulting in a surplus.

Preliminary estimates also suggest that the budget deficit for the year will come in just 2.5% above budget, on the back of disciplined spending and higher oil prices.

SPENDING ALLOCATIONS

Education will secure the largest share of the 2022 budget, accounting for SAR 185 billion of funding, while SAR 182 billion will be set aside for general items. Military spending will account for SAR 171 billion of the budget, while health and social development will represent SAR 138 billion of the funding. Most of the big-ticket items will see a drop in spending, with overall expenditure set to decline 5.9% to SAR 955 billion in 2022, compared to 2021.

The Ministry of Finance noted that the government achieved several objectives and gains throughout the past years in capital projects, leading to savings of more than SAR 400 billion, which was redirected to priority areas.

“The authority developed a working plan with about (20) of the highest-spending government entities to develop medium-term portfolios for capital projects, organise project priority according to
sectoral strategies and attune them to the objectives of Vision 2030 and the national trends, in addition to balancing them with the expenditure ceilings, according to the objectives of the FSP (fiscal sustainability programme).”

Inflation, a key threat to the global economy, will also remain moderate in Saudi Arabia, at around 1.3% in 2022, edging up higher to around 2% in 2023 and 2024.

The government pursued a number of Vision 2030 realisation programmes and mega projects, as well as investment projects in various sectors, including high-level investment in infrastructure in the
past period. But as several of the projects are concluded, and many involving the private sector, capital expenditures will decline by 18.2% in 2022 compared to the 2021 estimates, to reach approximately SAR 92 billion, the ministry noted.

On the other hand, the government plans to continue to implement several projects in all sectors, including infrastructure projects, residential cities, highway projects, housing unit construction and water plants,” the ministry added.