7/12/2023–|Last updated: 12/7/202301:26 PM (Mecca time)
Government data showed today, Thursday, that Saudi Arabia’s real gross domestic product declined by 4.4% in the third quarter, amid a decline in oil activities by 17% from their levels a year ago after crude production cuts under the OPEC Plus agreements, according to what Reuters reported.
Riyadh announced last week that it would extend its voluntary oil production cut by one million barrels per day until March 2024.
Despite the sharp decline, the government still expects 2023 GDP growth of 0.03%, according to the 2024 budget released yesterday, Wednesday.
The estimates, published by the Saudi General Authority for Statistics on Thursday, included that non-oil activities achieved an increase of 3.5% on an annual basis in the third quarter, while government activities recorded a growth of 1.9%.
Previous official estimates indicated that the GDP for the third quarter would shrink by 4.5%.
Economic growth rose last year in light of significant gains as a result of the increase in crude oil prices, which averaged about $100 per barrel, which resulted in recording the highest growth in gross domestic product among the G20 countries, and the country’s first budget surplus in nearly a decade.
But since then, the decline in oil production and the decline in its prices have affected the economy of the world’s largest oil exporter, and non-oil GDP growth reached about 5.9% in 2023, significantly outpacing the performance of the general economy.
Slight decrease in revenue
Despite the extension of oil production cuts and the decline in crude prices, Saudi Arabia expects a slight decline in revenues in the 2024 budget.
Data from the Saudi Ministry of Finance reported that total spending next year will reach 1.251 trillion riyals ($334 billion), an increase of about 12% over the 2023 budget.
Saudi Arabia’s estimates indicated that total revenues would reach 1.172 trillion riyals ($312.5 billion) in 2024, compared to expectations of1.193 trillion riyals ($318 billion) for the year 2023.
The data expected real GDP growth of 4.4% in 2024, after a meager growth of only 0.03% this year.
#Saudi_Budget 2024 | To meet financing needs, the government is working to continue borrowing in accordance with the approved annual borrowing plan to finance the expected budget deficit and to repay the principal due in 2024. pic.twitter.com/VqfEXVPPsT
— Saudi Ministry of Finance (@MOFKSA) December 6, 2023
Saudi Crown Prince Mohammed bin Salman affirmed his country’s commitment – in the 2024 budget – to promoting growth in the economy through expansion in government spending, noting that the budget comes in support of many programs and initiatives, and includes investments to support infrastructure, develop promising economic sectors, and enhance the attraction of… Investments, stimulating industries, and raising the percentage of local content and Saudi non-oil exports, according to what the Saudi News Agency (SPA) reported.
Debt markets
Despite the expected recovery next year, Saudi Arabia will resort to debt markets to manage an expected budget deficit of 79 billion riyals in 2024 (1.9% of GDP), compared to a deficit of 82 billion riyals in 2023 (2% of GDP).
The Ministry of Finance expected that public debt would constitute about 26% of GDP in 2024, compared to slightly less than 25% of GDP in 2023.
Saudi Minister of Investment Khalid bin Abdulaziz Al-Falih said that raising investment spending in the state’s general budget by 30% reflects the great support of the Saudi leadership to enhance economic growth, achieve sustainability, and increase quality investments.
The Saudi Ministry of Finance stated in a statement on the “X” website that “despite the economic challenges and risks, the positive factors of the Kingdom’s strong economy are turning these challenges to its advantage.”
Saudi Finance Minister Mohammed Al-Jadaan said that Saudi Arabia’s annual budget is based on “very conservative” estimates of oil revenues, which means that the deficit is not the result of fluctuations in oil prices, but rather from a deliberate decision to increase spending.
Al-Jadaan added in a press briefing, “We actually deliberately decided to spend more and cause the deficit knowingly and consciously,” because we believe that a 3% deficit “is a completely good thing… if that money is spent correctly,” according to what Agence France-Presse reported.
#Saudi_Budget 2024 | The most important things mentioned by His Excellency the Minister of Finance in the press conference accompanying the announcement of the state’s general budget for the fiscal year 2024 pic.twitter.com/0XB6eBwyhK
— Saudi Ministry of Finance (@MOFKSA) December 6, 2023
Oil figures
Saudi daily production reached about 9 million barrels per day, which is much less than its announced capacity of 12 million barrels per day.
Saudi Aramco Oil Company recorded a 23% year-on-year decline in third-quarter profits as a result of lower oil prices and production cuts, compared to a 19.25% decline in net profit in the first quarter, and 38% in the second quarter compared to 2022.
Aramco’s profits last year amounted to $161.1 billion, a record level according to the company. Saudi Arabia owns 90% of the company’s shares, and relies on its revenues to finance Vision 2030 projects.
