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The government recorded a budget deficit of SAR 81 bn — 2% of GDP — in FY 2023, compared to a SAR 16 bn surplus in its approved budget for the year, according to the latest figures from its Year-End Budget Performance report (pdf). The deficit came on the back of increased spending on economic diversification projects; the latest figures are nearly identical to earlier data released in February.
REMEMBER- The Kingdom reported its sixth consecutive quarter with a budget deficit, posting a deficit of SAR 12.4 bn in the first quarter of 2024 — four times higher than its shortfall in 1Q 2023. Officials are accepting modest fiscal deficits as the price of pursuing growth.
No surprise there: Policymakers have accepted small deficits as the price of continuing to invest in growth: “We intentionally decided to spend more and cause the deficit. If you spend that money right, on productive assets, then it’s money well spent,” Finance Minister Mohamed Al Jadaan said in December during the FY 2024 budget forecast. He signaled it will continue to run deficits to support the “government’s strategic expansionary spending” even as it paced out some components of select gigaprojects. Some officials have taken to calling gigaprojects modular and Neom has gone on a drive to underscore to contractors and bankers that everything is on track.
THE BREAKDOWN-
Non-oil revenues rose 15.5% to SAR 458 bn in FY2023 compared to the approved budget on the back of structural reforms for diversification and improved tax management and collection. Total revenues were up 7.3% y-o-y to SAR 1.2 trn due to a rise in oil and non-oil revenues. Oil revenues came in at SAR 755 bn. Revenues from goods and services tax came in at SAR 262 bn, while revenues from capital gains tax more than doubled to SAR 39 bn. Taxes on foreign trade and custom duties hit SAR 22 bn.
Total expenditures for FY 2023 rose 16.1% to reach SAR 1.3 tn compared to the approved budget due to structural reforms and diversification projects. Public spending on nearly all sectors saw an increase in comparison with the approved budget, with health and development sectors seeing the highest increase at 35.2% to SAR 256 bn. This was driven by additional allocations for social protection programs aimed at alleviating cost pressures. Military spending was the only sector seeing a decline in comparison with the approved budget with a 1.8% drop to SAR 254 bn.
What to expect in 2024: The budget deficit is expected to come in at SAR 79 bn by the end of FY2024, leaving the government short of SAR 86 bn in total financing needs, according to the latest figures (pdf) by the National Debt Management Center.
