BUDGET 2025

SAUDI KEEPS FISCAL DISCIPLINE AND FOSTERS GROWTH

Saudi Arabia has unveiled its budget statement for fiscal year 2025, emphasising a continued focus on economic diversification underpinned by the kingdom's Vision 2030 strategy.  

The statement by the Ministry of Finance highlights fiscal discipline alongside expansionary spending, signalling a balanced approach to navigating global economic uncertainties while advancing transformative projects.

Despite global economic headwinds, recent reforms have enabled the Saudi economy to achieve significant milestones, particularly in the non-oil sectors. Structural changes have strengthened the business environment and expanded private sector participation. 

Real GDP growth for 2024 is expected to reach 0.8%, with non-oil activities contributing 3.7%. This shift underscores the kingdom's success in reducing oil dependency, despite a 6.8% decline in oil activities due to voluntary production cuts under the OPEC+ agreement.

The diversification efforts are paying o with strong foreign direct investment flows.

“The kingdom has successfully enhanced its economic position by attracting foreign direct investment, with net inflows reaching SAR 21.2 billion in H1 of FY2024,” according to the ministry’s 2025 budget statement. “Additionally, the number of investment licenses granted by the Ministry of Investment increased by around 71.5%, reaching 9,695 licenses through Q3 of FY2024 compared to the same period last year.

For 2025, the government anticipates a 4.6% increase in real GDP, largely driven by non-oil activities. Key growth areas include private sector expansion, labour market reforms, and enhanced regulations to attract investment. This aligns with the overarching goals of Vision 2030, which seeks to diversify the economy and bolster sectors such as technology, tourism, and renewable energy.

PUBLIC SPENDING

Saudi Arabia’s fiscal approach for 2025 reflects a commitment to long-term sustainability. Total expenditures for 2024 are forecast to reach SAR 1.345 trillion, a 7.5% increase over initial estimates, driven by infrastructure projects and initiatives aimed at improving public services and quality of life. For 2025, expenditures are projected at SAR 1.285 trillion, with continued investments in giga-projects, sectoral strategies, and economic diversification.

The kingdom's fiscal expansion has, however, resulted in a projected budget deficit of SAR 115 billion (2.8% of GDP) for 2024, with a slightly reduced deficit of SAR 101 billion (2.3% of GDP) expected in 2025. This deficit is manageable within the context of Saudi Arabia’s broader fiscal reserves and borrowing strategies, which aim to finance transformational projects without compromising fiscal stability.

Revenues for 2024 are estimated at SAR 1.23 trillion, a 4.9% increase from initial forecasts, supported by stable oil markets and strong non-oil revenue growth. For 2025, revenues are projected at SAR 1.184 trillion, with a gradual rise to SAR 1.289 trillion by 2027. Conservative projections reflect global economic uncertainties, particularly around oil price volatility.

Public debt is expected to rise to SAR 1.3 trillion (29.9% of GDP) in 2025 from SAR 1.199 trillion in 2024 (29.3% of GDP). The government plans to continue proactive domestic and external borrowing, leveraging favourable market conditions to fund infrastructure projects and refinance maturing debt.

The average Consumer Price Index (CPI) is forecast to increase by 1.7% for 2024, remaining significantly lower than global inflation rates. This reflects Saudi Arabia's eFFective policy measures to contain price pressures while ensuring economic stability. Inflationary trends are expected to stay under control in 2025, supporting household purchasing power and business confidence.

VISION 2030 ALIGNMENT

Acknowledging global geopolitical risks and oil market uncertainties, Saudi Arabia has prepared multiple revenue scenarios for 2025. The baseline scenario assumes moderate growth, while alternative projections account for higher and lower revenue outcomes. This contingency planning underscores the kingdom's adaptability to external shocks.

The FY2025 budget reaffrms Saudi Arabia’s commitment to its Vision 2030 framework, which seeks to create a diversified and sustainable economy. Flagship developments like NEOM, Qiddiya, and the Red Sea Project are at the forefront of this transformation, supported by targeted investments in infrastructure and innovation.

Fiscal policies are designed not only to drive economic growth, but also to enhance the quality of life for citizens and residents. Investments in education, healthcare, and renewable energy reflect a holistic approach to sustainable development

The FY2025 budget balances fiscal prudence with strategic investments, reinforcing the kingdom’s position as a regional economic powerhouse. By fostering private sector growth, diversifying revenue streams, and maintaining fiscal stability, the country is well-positioned to navigate economic challenges while delivering on its ambitious Vision 2030 goals..