ECONOMY

STRONG FUNDAMENTALS ON DISPLAY IN SAUDI’S PRE-BUDGET STATEMENT

Saudi Arabia’s pre-budget statement for fiscal year 2025 showcased its strong economic fundamentals and focus on expanding key sectors.

The Ministry of Finance projected total expenditures of SAR 1.285 trillion and revenues of SAR 1.184 trillion during the year, resulting in a deficit of 2.3% of GDP. The statement highlighted the government’s commitment to increasing strategic transformational spending to support economic diversification and sustainable growth.

Estimated total revenues are expected to rise by almost 9% to SAR 1.289 billion by 2027, while expenditures are projected to grow to SAR 1.429 trillion during that period. These forecasts are based on ongoing economic developments in the kingdom, implementation of financial and economic initiatives, and adoption of fiscal policies aimed at ensuring budget stability and sustainability.

Among the key factors contributing to Saudi Arabia's GDP growth include the expansion of non-oil sectors such as tourism, entertainment, transportation, logistics, and industry. These sectors have helped improve the quality of life in the country, empower the private sector, and reduce unemployment to historic lows. The positive outlook for the Saudi economy is also supported by the expectations of international organisations and credit rating agencies.

The pre-budget statement also anticipates real GDP growth of 0.8% for 2024, driven by the non-oil sector’s estimated growth rate of 3.7%. Additionally, the recent decline in interest rates is expected to stimulate demand, potentially boosting overall economic growth. Meanwhile, the inflation rate is anticipated to remain moderate, with the consumer price index expected to reach around 1.7% by the end of 2024.

PRUDENT SPENDING

Finance minister Mohammed Al-Jadaan emphasised the government's focus on directing spending towards essential services for citizens and residents, as well as on strategic projects that enhance economic growth and sustainable development in Saudi. He noted that continued reforms under Vision 2030 would support economic diversification, expand the role of the private sector, and promote the growth of promising industries, thereby creating more jobs and business opportunities.

Al-Jadaan also highlighted the government's long-term fiscal planning approach, which ensures sustained transformational spending to achieve economic gains and sustainable growth. He underscored the flexibility of Saudi Arabia's public finances, allowing the country to respond to challenges over the medium and long term. The pivotal roles of the Public Investment Fund (PIF) and the National Development Fund (NDF) in supporting economic stability were also emphasised.

Moreover, the minister pointed to the promising economic outlook for 2025, with an estimated real GDP growth of 4.6%. This reflects the authorities’ commitment to implementing its ambitious strategies and achieving sustainable development, which has bolstered investor confidence and strengthened the kingdom's regional and global economic standing.

Despite global economic slowdowns, geopolitical tensions, and ongoing challenges, Saudi Arabia has demonstrated fiscal resilience, backed by safe levels of government reserves, manageable public debt, and a flexible spending policy. 

The government intends to continue borrowing in line with its annual debt plan to finance the budget deficit and repay maturing debt in FY 2025. The government will also explore market opportunities for alternative financing to ensure debt sustainability, while accelerating the implementation of Vision 2030 programmes. 

Issued for the seventh consecutive year, the pre-budget statement reflects the country’s ongoing commitment to transparency in public finance and enhanced fiscal disclosure. It also highlights thegovernment's progress in implementing reforms that have strengthened its fiscal position amidst global economic challenges.

BUSINESS SENTIMENT UPBEAT

Meanwhile, business conditions in Saudi Arabia's non-oil private sector continued to improve significantly in September, according to the S&P Global Ratings’ Purchasing Managers Index (PMI) for September. The latest data indicate faster growth in business activity and stronger sales momentum, marking the sharpest increase in new orders since May. This follows a more subdued period of growth earlier in the third quarter.

PMI rose for the second consecutive month, pointing to an accelerating growth in the non-oil private sector. Sharper expansions in output and new orders contributed to this rise, alongside tightening supply conditions. After relatively moderate growth in August, business output saw a robust rebound, with improvements recorded across various sectors of the non-oil economy. Companies attributed the uptick in activity to stronger demand and the launch of new projects.

New order growth also picked up pace in September, reaching a four-month high. Survey respondents pointed to stronger domestic demand, an influx of new clients, and effective promotional strategies as drivers behind the increase. While export orders rose as well, the growth in international sales was modest compared to the surge in overall demand.