Saudi Arabia has announced that it will spend 978bn riyals ($261bn) in its largest ever budget in 2018, up from 926bn riyals the year before.
This is the country’s first expansionary budget in three years, and comes at a time of economic struggle, which has occured since the collapse of oil prices in 2014.
This year, Saudi Arabia entered a recession, contracting 0.5%, due to lower oil output and low confidence in the private sector. The private sector has been impacted by the slowdown in government spending as the government struggles to keep its widening fiscal deficit in check. However, the government predicts growth to increase significantly, to 2.7% next year.
Finance Minister Mohammed al-Jadaan said:
“The government has decided that now it can spend more while keeping the deficit within the targeted limit and that it can achieve more non-oil revenue […] That’s why balancing the budget has been postponed to 2023. We are not in a hurry.”
Last week, Riyadh announced a $19bn stimulus package to support the private sector. This included subsidised loans for house buyers and developers, and financial support for companies. The government is trying to push ahead reform and maintain fiscal discipline at the same time.
However, recently, a crackdown on corruption has dampened the investment climate. Over 200 royals and businessmen have been detained, rattling the business community and foreign investors. The government is currently hoping to attract investment in order to back Prince Mohammed’s drive to reduce the economy’s dependence on oil.
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