Saudi Arabia sees budget deficit of $27 bln in 2025
Adds analyst comment
RIYADH/DUBAI, Nov 26 (Reuters) -Saudi Arabia approved its 2025 budget on Tuesday, which forecasts a fiscal deficit of $26.88 billion or 2.3% of GDP next year, as it bolsters spending on its economic transformation goals, amid downside risks to revenue forecasts.
Following are comments from Saudi Arabia's crown prince, finance minister, economists and analysts:
MOHAMMED BIN SALMAN, CROWN PRINCE, PRIME MINISTER as quoted by state news agency SPA:
"The positive indicators of the Saudi economy are a result of the ongoing reforms under vision 2030."
"The Kingdom is projected to have the second-fastest GDP growth rate among major economies next year, estimated at 4.6%. This growth is fuelled by the increasing contribution of non-oil activities, which reached a record 52% in 2024."
"The financial reforms implemented by the Kingdom, through the government's adoption of financial policies that maintain financial sustainability and efficient financial planning, have positively impacted its credit ratings."
MOHAMMED AL JADAAN, MINISTER OF FINANCE:
"The results to date confirm the success of economic and fiscal reforms, which will continue to enhance comprehensive economic growth and develop public finance management, focusing on improving the quality of services provided to citizens, residents, and visitors."
"We will continue maintaining the Kingdom's financial position and achieving fiscal sustainability by maintaining sustainable levels of public debt and considerable government reserves."
"The Kingdom will continue expanding strategic spending, supporting economic diversification, and enabling the private sector."
JAMES SWANSTON, EMERGING MARKETS ECONOMIST AT CAPITAL ECONOMICS:
"The approved 2025 Budget didn't spring too many surprises given the Pre-Budget Statement delivered a month ago, but it confirmed that officials' turn to fiscal consolidation is here."
"Government spending will be cut by 4.5% in 2025, compared to actual spending in 2024. The breakdown showed that current expenditures are being cut by 4%, with the largest cuts coming to goods and services and "other" expenditures, but there is also an additional 7% cut to capital expenditure."
"The latter we suspected would occur given the comments from officials before on scaling back expectations of gigaprojects and the past form in 2014-16 of the Kingdom paring back capital expenditure spending during periods of lower oil prices."
MONICA MALIK, CHIEF ECONOMIST AT ABU DHABI COMMERCIAL BANK:
"The budget points to government spending still providing meaningful support to the economy, with overall expenditure will still remain high. This is despite a planned contraction in government spending in 2025, which we do not see as a sharp retrenchment."
"The focus remaining on progressing with the transformation plan and the investment programme, while realizing a contained deficit. This stance should lead to a gradual build up in government debt, thereby maintaining Saudi Arabia's strong fundamentals."
JUSTIN ALEXANDER, DIRECTOR AT KHALIJ ECONOMICS:
"From the numbers themselves there isn't much change in the story - the state remains comfortable with deficit financing, as well it might given strong demand for its debt and an upgrade back to double A status. Still, spending is being controlled in some key areas such as salaries."
"If the budget assumes the current OPEC+ taper, equivalent to a 7% increase in crude on average, then this decline in revenue implies either substantially lower prices or a reduction in Aramco dividends - possible a combination of the two."
ZAHABIA GUPTA, DIRECTOR, LEAD ANALYST FOR MIDDLE EAST & CENTRAL ASIA AT S&P GLOBAL RATINGS:
“The Saudi 2025 budget estimates the fiscal deficit at 2.8% of GDP for 2024, which is in line with our estimates. In 2025, the government is targeting a decrease in expenditure by about 4% relative to 2024 estimated outcomes. We believe that the government is likely to increase spending slightly instead as it continues to ramp up investment in strategic projects for Vision 2030. We forecast that government debt levels will remain relatively low over the next three years, and that they will maintain a comfortable net asset position exceeding 40% of GDP.”
Reporting by Reuters Gulf bureau; editing by Jonathan Oatis
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