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Saudi is expected to prioritize non-oil investments as the Kingdom deploys some USD 1 tn in capex across six key sectors by 2030, according to Goldman Sachs Research. Non-oil investments are slated to get a 73% slice of the pie, up from an earlier 66% forecast, Goldman Sachs analyst Faisal Al Azmeh said.
IN CONTEXT- The government has penciled 4.5%-5.0% growth in non-oil GDP this year, with Moody’s Analytics pegging the figure at a lower 3%-4% per year through 2030.
Renewables in the limelight: Clean energy is set to receive USD 235 bn in capex during the next six years, up from a previous forecast of USD 148 bn, as the Kingdom more than doubles its 2030 solar capacity target to 100-130 GW, up from 58.7 GW.
Natural gas, too: Natural gas remains “a key contributor to the country’s decarbonization, economic development, and diversification plans,” Al Azmeh writes. The investment bank’s research house expects investments in natural gas to remain strong, while shrinking to USD 220-190 bn, down from a previous forecast of USD 260-230 bn.
Mining + aviation on the list: The Kingdom is looking to grant upwards of 30 mineral exploration awards this year, supported by a USD 182 mn incentive program to lure in investments into the sector. Transport and logistics are also in heavy spending, with the government expected “to invest USD 100 bn in aviation, and another USD 100 bn or so in electric vehicles, logistics, and other sub-sectors.”
But will the budget deficit prove a hitch? Goldman Sachs Research expects the Kingdom’s budget deficit to widen to 4.3% this year, from 2.2% in 2023, with more than half of the increase attributed to higher spending and the rest coming on the back of lower earnings from oil. The Kingdom will nonetheless have to turn to other sources of financing to “bridge an estimated USD 25 bn per year funding gap for its capex projects,” the report reads.
REMEMBER- 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 the treasury will continue to run deficits to support the “government’s strategic expansionary spending” even as it paced out some components of select gigaprojects.
