2024-10-28 11:45:00
Saudi Arabia is cautious about its 2025 budget. Oil revenues are lower than expected, growth forecasts for 2024 have been revised downwards. The world’s top crude oil exporter has therefore scaled back some projects.
We are still far from severe and inflexible austerity. Investments are still huge Saudi Arabia. The budget is even increasing with deficits assumed until 2027, but we are seeing a recalibration with public spending decreasing and some projects have been revised downwards. Example: the futuristic city” The line » which had to be able to accommodate 1.5 million people. The project has been revised: this linear city in the middle of the desert will only be able to accommodate 300,000 inhabitants.
How to explain this caution?
The message conveyed by this pre-budget is that unlimited money does not exist, not even in the Gulf petromonarchy. It’s a mechanical effect: when oil revenues fall short, Saudi Arabia turns its back. “ You have an economy that is still about 40% dependent on the oil sector, explains Laure De Nervo, economist at Crédit Agricole specializing in the Middle East, there have been several announcements of production cuts. First in April 2023, then the November 2023 cut announcements were supposed to be revoked this month, but this has been postponed and is only due to happen from December, if it hasn’t been postponed yet. Mechanically, you have a fourth semester that will be affected ».
Foreign direct investment is not yet at the level
Saudi Arabia, especially Crown Prince Mohammed Ben Salman, has this desire to diversify the economy the Vision 2030 program launched eight years ago. Produce less oil and develop tourism, industry and new technologies.
At the halfway point it seems necessary to review priorities. Above all because in terms of foreign direct investments we are far from our declared ambitions. The goal of $100 billion in 2030 barely reached $12.5 billion last year.
« They have a rather significant image deficit, I think there are financial challenges, there are quite significant economic fluctuations in the price of oil, also there is a geopolitical context that is not lost on anyone and which creates a lot of uncertainty: the elections in the United States between a few weeks will also be important assures Foued Kefif, founder of the Middle X consultancy firm in Riyadh. All this means there is uncertainty and perhaps less investment than expected, however the market is ultra dynamic. »
Diversification on track
No slowdown, just a financial update before the Asian Winter Games in five years and especially the 2030 World Expo. Furthermore, non-oil growth is dynamic, unemployment rate is declining; debt is still low, enough to stimulate investment.
The only thorn in the side is that the country still depends on its hydrocarbons. The transition to a more diversified economy will be long, expensive and, to top it off, the success of this transition today depends on oil revenues.
#Faced #declining #oil #revenues #Saudi #Arabia #cautious #spending