Increasing jobs in the labor market

The positive expectations for the Saudi economy for the year 2024 are considered an extension of the positive developments in the actual performance of the Saudi economy since the beginning of 2021, as estimates of economic growth rates for the year 2024 in the medium term were revised, which indicate a growth in real GDP by 4.4 percent, supported by output growth.

Local non-oil activities, with the expectation that the private sector will continue to lead economic growth and contribute to increasing jobs in the labor market, in addition to improving the trade balance, continuing to implement programs and initiatives to achieve Saudi Vision 2030 and sectoral and regional strategies, and achieving economic activities positive growth rates during the year 2024. And in the medium term.

It is expected that the noticeable and expected recovery in the Kingdom’s economy will lead to positive developments in terms of revenues in the medium term, as total revenues for the year 2024 are expected to reach about 1.17 trillion riyals ($312 billion), a slight decrease of 0.6 percent from what is expected to be achieved.

$333 billion

In 2023, this is due to the government’s approach to basing estimates of oil and non-oil revenues in the budget on conservative standards in anticipation of any developments that may occur in the local and global economy, with it expected to rise to about 1.25 trillion riyals ($333 billion).

in 2026, supported by expectations of local and global economic growth in the medium term, which in turn will contribute to the stable growth of non-oil revenues in connection with the growth of economic activity.

The announcement of the preliminary statement of the Saudi budget 2024 coincides with the government’s continued implementation of initiatives and structural reforms at the economic and financial levels in light of Saudi Vision 2030

Including the development of public financial policies in a way that contributes to achieving stability and sustainability of the state’s general budget, and the government’s adoption of expansionary spending policies that support economic growth, as The 2024 budget is expected to record a deficit of about 1.9 percent of GDP, with budget deficits expected to continue at similar levels in the medium term.

Economic reforms are the largest

The package of economic and legislative reforms that Saudi Arabia has worked on during the past five years is the largest package of economic reforms witnessed by any country in the world in the foreseeable future, and it has been clearly reflected in the growth rates of the economy on the one hand, and on the government’s ability to spend growing in its annual budget on the other hand.

These reforms have become a strong barrier to many of the conditions that the global economy has faced in the past few years and is still facing.

AP

Khurais oil field, Saudi Arabia.

Global economic growth

At a time when difficult global economic growth opportunities are dominating the international atmosphere and representing an obstacle in the eyes of international investors wishing to invest in Saudi Arabia, reliable international reports, such as the Article IV consultation report of the International Monetary Fund’s experts.

Reports of international classification agencies, as well as growth indicators The positivity in the Saudi economy, all of which constitute a strong support for these investors to pump more investments into the Saudi economy, due to their conviction that it is the most powerful and vibrant economy among the world’s economies during the current stage.

The government is working to continue to meet financing needs in accordance with the approved annual borrowing plan to finance the expected budget deficit and to pay the principal due in 2024, and to also continue to search for available opportunities according to market conditions.

Additional financing

To implement additional financing operations to pay the principal due for the coming years, and to finance some Strategic projects, in addition to exploiting market opportunities to implement alternative government financing operations that would enhance economic growth, such as financing capital projects and infrastructure, with the aim of diversifying financing channels to maintain the efficiency of markets and enhance their depth.

Preliminary expectations indicate that the inflation rate for the year 2023 may record an increase of about 2.6 percent, and estimates indicate that inflation rates will continue to remain at acceptable levels in the medium term, thanks to the proactive measures and policies taken by the government to contain the rise in prices and set a maximum price limit. Gasoline and ensuring the abundance of food stocks, in addition to supporting social protection programs.

Global growth and the Saudi budget challenge

The International Monetary Fund expects a slowdown in the growth of the global economy, according to the World Economic Outlook report for July 2023, as it expects growth of about 3 percent in 2023 and 2024, compared to a higher growth in 2022 of about 3.5 percent.

The Fund’s forecasts also indicate that growth in emerging market and developing economies will stabilize at 4 percent and 4.1 percent for the years 2023 and 2024, respectively, compared to 4 percent growth achieved in 2022.

However, these expectations did not affect Saudi Arabia’s decision to estimate a budget for the year 2024, as it was not very conservative in its estimates of oil prices and growth rates of the national economy.

On the contrary, the budget came in terms of the volume of expected revenues and estimated spending, superior to all the challenges that the global economy faces today. This is due to three basic foundations:

The first basis

is that Saudi Arabia is working vitally to achieve the goals of Vision 2030, and is even preparing during the years 2027 and 2028 to prepare the new national strategy for the year 2040, which means that the government is continuing to spend heavily without establishing any austerity policies that may lose the economy many of its gains that it gained. achieved during this period.

As for the second basis

, it is the decision of the “OPEC Plus” countries, led by Saudi Arabia and the rest of the member states, to achieve more balance in the oil markets, thus sparing the markets sharp fluctuations that may affect the growth of the economies of the producing countries and the ability of their governments to spend domestically. This is a strategic decision par excellence.

The third pillar

revolves around the strong financial position of the Kingdom of Saudi Arabia, as it is one of the countries in the world that has the lowest rates of public debt compared to the size of the economy and domestic output, which is extremely important and allows the government to continue investment spending in a way that increases development rates.

Looking at the oil markets, the average price of Brent crude futures contracts decreased by 22.2 percent from the beginning of this year until last August, with the average price recording about $80.8 per barrel, compared to $103.8 per barrel during the same period.

Since last year, prices also recorded a rise in September, exceeding levels of $95 per barrel. The fluctuation of average oil prices during the year 2023 is due to the slowdown in global growth resulting from high inflation rates, high interest rates, and the continuation of the geopolitical crisis between Russia and Ukraine.

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OPEC Plus

The Kingdom and the OPEC Plus countries have voluntarily reduced oil supplies to support the stability and balance of oil markets and raise their efficiency in enhancing precautionary efforts, as the Kingdom’s average supplies from the beginning of 2023 until the end of August decreased by 5.22 percent, reaching about 9. 96 million barrels per day, a decrease of 548 thousand barrels per day.

The Kingdom announced a voluntary reduction of 500,000 barrels per day from the beginning of May until the end of 2023.

The Organization of the Petroleum Exporting Countries (OPEC) estimated that the total global demand for oil in 2023 will grow by 2.4 percent compared to the previous year, bringing global demand for oil to about 102.1 million barrels per day. Demand was estimated to rise by about 2.2 percent in 2024 compared to 2023, reaching 104.3 million barrels per day.

In numbers… developments in the local economy

Despite the slowdown in global economic growth prospects for the year 2023, and the state of uncertainty resulting from the challenges resulting from the current geopolitical tensions, inflationary pressures, high interest rate rates, and the escalating risks of recession in a number of major economies.

The strength and durability of the Kingdom’s economy enabled it to confront these challenges, as it achieved The Kingdom achieved growth rates of 2.5 percent during the first half of 2023, led by growth in the gross domestic product of non-oil activities, which recorded 5.7 percent.

It is also expected that positive growth rates will continue to be achieved in various non-oil economic activities in the second half of the year. .

Manufacturing activity will grow

It is expected that manufacturing activity will grow, as the average index of the industrial production index reached about 1 percent from the beginning of the year until the month of July, driven by the growth in the number of factories that began production from the beginning of the current year until the month of July, at about 569 factories, and the total investments amounted to In the sector, 16.3 billion riyals ($4.34 billion).

Gross fixed capital formation (non-governmental) during the first half of 2023 achieved an annual growth of 8.5 percent, while foreign direct investment achieved an annual growth in the first quarter of the year at a rate of 10.2 percent, and investment deals amounted to About 104 deals were completed during the first half of 2023, achieving a growth of about 3 percent compared to the same period last year, which will reflect positively on the local economy.

Economic reforms

Economic reforms contributed to improving labor market indicators in line with the goals of Saudi Vision 2030, which reflected positively on the unemployment rate for Saudis, reaching 8.3 percent during the second quarter of this year, as this percentage is one of the lowest in more than twenty years.

This came as a result of many initiatives, such as nationalization initiatives, initiatives supporting the private sector represented by raising the percentage of local content in projects to develop national industry and logistics services, stimulating national exports, privatization programs aimed at providing opportunities for citizens in the labor market, and the Women’s Empowerment Initiative, which resulted in strengthening Its participation in the labor market reached 35.3 percent.

During the second quarter of this year, exceeding the Vision 2030 target of 30 percent. This also clearly reflects the improvement of the business environment in the Kingdom in light of the positive growth levels of the Saudi economy represented in the non-profit sector. Oil.  Saudi budget

 Threats to growth

The process of analyzing the financial and economic risks facing the Kingdom’s economy represents a vital part in understanding the current situation and the main challenges, which contributes to adopting effective policies and strategies to deal with these risks and achieve the Kingdom’s financial sustainability.

In light of the beginning of a decline in global inflation rates and the relative stability of local inflation rates, the risks that may lead to a decline in domestic demand are considered low.

n addition to the continued contribution of initiatives to enhance the role of the private sector and its implications for supporting consumption and investment indicators, as well as the improvement of employment and nationalization rates, as the size represents The private sector’s contribution to the gross domestic product is about 41 percent for the year 2022, while it aims to raise this contribution to 65 percent in accordance with Saudi Vision 2030.

In conclusion Saudi budget

the government has adopted a number of measures and policies that enable it to confront the dangers, including setting a ceiling on gasoline prices, enhancing food security, in addition to strengthening the system of social support and subsidies, subsidizing basic goods and services, as well as strengthening and developing the non-oil sector.

The government developed a higher and lower scenario for revenues in light of global and local developments, considering the challenges facing the global economy and geopolitical risks. The established estimates contribute to the government’s readiness to deal with any of these scenarios and build a flexible financial space.

Relying on structural revenue estimates also contributes to limiting spending, taking into account fluctuations in oil markets.