On 6 December 2023, the government approved the FY 2024 budget statement as presented by the Ministry of Finance (MoF). In our annual KPMG budget report, we present our views, supported by internal analysis and other sources.
According to the MoF, after rapid real GDP annual average growth of 8.7 percent in fiscal year 2022, the economy is estimated to expand by a lower annual rate of 0.03 percent in 2023. Economic growth in 2023 weakened largely in line with reduced output in the oil sector and base effects. Meanwhile, the non-oil sector is estimated to expand at a healthy rate, supported by a range of sub-sectors such as transport, storage, and communications.
During 2023, international oil prices have remained weak amid tepid demand in key markets despite OPEC+ supply cut agreements and global supply disruptions as geopolitical tensions remain elevated. Overall trends have resulted in only modest support for oil producers.
Private consumption in 2024 will continue to be boosted by existing government policies, such as social protection programs and the ceiling on gasoline prices, that will further boost real incomes. Vision 2030 initiatives will continue to stimulate the broader economy as related projects and domestic investment by the National Development Fund (NDF) and Public Investment Fund (PIF) will boost both public and private sector spending. These trends and more are drivers behind the MoF’s expectations that real GDP will recover to a respectable growth rate of 4.4 percent in 2024.
Continued growth in the non-oil economy will drive broader economic activity and thus non-oil revenues in 2024. The government’s commitment to controlling spending, even as it continues to invest in a range of initiatives designed to expand and diversify the economy, will help to contain public expenditure during the next fiscal year.
The 2024 fiscal year budget statement estimates a 5.9 percent year-on-year (YoY) drop in total revenues, to SAR1,193 billion, in the 2023 fiscal year, largely in line with a fall in oil prices. The out-turn is nevertheless greater than the revenue estimate of SAR1,130 billion targeted in the 2023 fiscal year budget statement.
Actual government spending in fiscal year 2023 is estimated at SAR1,275 billion, compared with originally planned spending of SAR1,114 billion. The greater-than-planned expenditure reflects in part government policies designed to limit the impact of high global inflation on domestic real incomes; an expansion of social support for target groups has been an important pillar of this strategy. Meanwhile, targeted development spending designed to diversify the economy and enhance the role of the private sector drove an increase in expenditures on goods and services.
Looking ahead, the government will remain committed to strategic expenditure on infrastructure, its mega and giga projects, regional and sectoral development and economic diversification that supports the growth of the private sector. That also includes portions of anticipated spending on Riyadh Expo 2030 and the World Cup 2034 as Saudi Arabia successfully bid to attract these mega events to be held in the Kingdom. It is too soon to assess the impact of these on the annual budget figures. Overall, the government will seek to balance its fiscal sustainability versus economic and social objectives.
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