ALBAWABA - Saudi Arabia, the Arab world's largest economy, has forecasted a budget deficit of 2.3% of GDP in 2025, with the shortfall expected to continue in the following years, reaching 2.9% in 2026 and 3.0% in 2027.
This trend underscores the kingdom's strategic shift as it embarks on an ambitious economic reform agenda aimed at reducing its reliance on oil and fostering growth in non-oil sectors, including tourism, business, and mega-projects like the futuristic NEOM city, as AFP notes.
The Saudi finance ministry attributes the widening deficit to increased government expenditures and declining oil revenues. In 2025, government spending is projected to reach approximately 1.3 trillion riyals ($342.6 billion), while revenues are expected to decrease by 4.3%, resulting in a 101-billion-riyal deficit.
The kingdom’s financial outlook has been revised downward, with growth forecasts for 2024 dropping from 4.4% to just 0.8%, driven by an estimated 3.7% increase in non-oil activities.
Saudi Arabia's dependency on oil revenues remains evident, despite recent efforts to diversify. The kingdom, world’s largest crude oil exporter, has been cutting oil production since 2022 to bolster prices, producing around nine million barrels per day, significantly below its 12 million bpd capacity.
However, with Brent crude prices trading at approximately $72 per barrel, well below the $96 required to balance the budget, government finances are under increasing pressure, as reported by Bloomberg.
Despite the fiscal challenges, Saudi officials remain committed to Vision 2030, Crown Prince Mohammed bin Salman's transformative plan to diversify the economy, with expansive spending policies aimed at fostering long-term sustainable growth, while borrowing remains a viable option due to the kingdom’s low debt levels.
The government’s projections anticipate stronger growth by 2027, with GDP expected to rise by 4.7%, signaling the potential for recovery as economic reforms take hold.
