The Saudi Ministry of Finance has announced the Pre-Budget Statement for Fiscal Year 2025 on September 30, 2024. The statement projects total expenditures at SAR1,285 billion ($346.95 billion) and total revenues at SAR1,184 billion ($319.68 billion), resulting in a deficit of 2.3 percent of Gross Domestic Product (GDP). It emphasized the Government’s commitment to increasing strategic transformational spending to foster economic diversification and sustainable growth.
Revenue and expenditure projections
For FY 2025, total revenues are estimated to reach approximately SAR1,184 billion, with projections of SAR1,289 billion by 2027. Total expenditures are forecasted at SAR1,285 billion, rising to SAR1,429 billion in 2027. The statement noted that, considering the Kingdom’s economic developments and the implementation of various financial initiatives, the 2025 budget is expected to reflect a 2.3 percent deficit relative to GDP.
Economic growth drivers
The statement highlighted that recent GDP growth rates have been bolstered by advancements in non-oil sectors, driving progress in tourism, entertainment, transportation, logistics, and industry. This growth has improved living standards, empowered the private sector, and lowered unemployment to historic lows. These developments have been positively recognized by international organizations and credit rating agencies regarding the Saudi economy’s performance. The statement also outlined 2024 projections, including a real GDP growth of 0.8 percent, supported by a 3.7 percent increase in non-oil activities. Additionally, a recent reduction in interest rates is anticipated to stimulate demand, potentially benefiting economic growth, with inflation expected to reach around 1.7 percent by the end of 2024.
Government spending priorities
Minister of Finance Mohammed Aljadaan emphasized the Government’s focus on targeted spending for essential services to citizens and residents. He also highlighted strategic projects aimed at enhancing economic growth and fostering sustainable development. He further expressed confidence that the Saudi economy will achieve positive growth rates in 2025 and beyond, driven by continued reforms and initiatives under Saudi Vision 2030. This approach aims to diversify the economic base, strengthen the private sector, and expand promising sectors, creating more business opportunities and jobs. Aljadaan underscored the Government’s long-term fiscal planning approach, which prioritizes strategic transformational spending to secure economic gains and sustainable growth. He also acknowledged the vital roles of the Public Investment Fund (PIF) and the National Development Fund (NDF) in maintaining economic stability.
Positive economic outlook
Aljadaan noted that the optimistic outlook for the Saudi economy in 2025 builds on the positive trends observed in recent years. The Pre-Budget Statement anticipates a 4.6 percent growth in real GDP, reflecting the Kingdom’s dedication to executing ambitious strategies and achieving sustainable development, thereby enhancing investor confidence and elevating the Saudi economy’s standing both regionally and globally.
Resilience amidst challenges
Moreover, Aljadaan reiterated that Saudi Arabia has shown resilience despite global economic slowdowns and persistent challenges. This resilience is characterized by healthy government reserves and manageable public debt levels. The country also maintains a flexible spending policy to address future crises, he said.
Borrowing and financing strategies
Furthermore, the Minister indicated that the Government plans to continue borrowing. This will align with the approved annual borrowing strategy. The borrowing aims to finance the anticipated budget deficit and repay due debt in FY 2025. There will also be a search for market opportunities to implement financing activities, including alternative government financing. It is expected that the public debt portfolio will increase strategically. This increase aims to ensure sustainability. It will also be driven by expanded spending to expedite critical programs and projects aligned with Saudi Vision 2030.
Commitment to transparency
Additionally, this Pre-Budget Statement marks the seventh consecutive year of the Kingdom’s commitment to transparency in public finance. It reflects ongoing reforms aimed at strengthening the financial position amidst global economic challenges.
For more news on banking & finance, click here.
