Saudi Focus

Saudi Focus

Saudi project spending expected to stay steady

01 January 2024

Saudi Arabia is unlikely to reduce project spending in 2024 despite the annual budget seeing a decline in expenditure compared to the actual estimate of 2023 spending, which has been put at SR1.28 trillion ($341.24 billion), a report said.

“Project activity is gathering pace and the recent award of the 2030 World Expo will only add to this momentum. In addition, project input costs (both labour and material) are rising and it will be difficult for the government to reduce capex next year (2024). Moreover, there does not seem to be any pressing need to do so, with both public sector savings and debt headroom substantial,” said Jadwa Investment in its commentary on Saudi Arabia’s budget projections.

Saudi Arabia’s budget for 2024, which was endorsed by the Council of Ministers on December 6, projects a total expenditure of SR1.25 trillion, which is 11 per cent above the projection made in the 2023 budget, when spending was forecast to reach SR1.13 trillion next year. 

However, authorities expect 2024 spending to fall compared to the actual estimate of 2023 spending, which has been put at SR1.28 trillion.

Revenue is projected to fall slightly (by less than two per cent) versus this year’s estimate, with lower implied oil earnings the main driver. Revenue is then expected to recover in the following years, reaching SR1.26 trillion in 2026. The budget deficit is forecast to narrow very slightly from two per cent of GDP this year to 1.9 per cent of GDP in 2024.

“In sum, and notwithstanding the projected fall in spending next year (compared to 2023) the overall spending envelope appears to have increased. We note that the medium-term fiscal projections now involve deficits, unlike the surpluses projected last year, indicating that the central government’s priority has shifted away from balancing the budget to Vision 2030 delivery. That makes sense given the fiscal room for manoeuvre that the government enjoys,” the report said.

“Meanwhile, capex is set to fall to SR189 billion in 2024, down 6.9 per cent from 2023 estimate. On one level, a decline is plausible given that the spike in 2023 capex was partly a result of the delivery of Covid-19-delayed infrastructure projects; indeed, the projection for 2024 is still high in recent historical terms. A reduction in budgeted capex is also understandable given the current oil price environment.

“That said, our bias is towards higher-than-budgeted capex in 2024 given the welter of outstanding projects to be delivered,” it said. 




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