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RIYADH: Saudi Arabia's Ministry of Finance has released its preliminary budget statement for the 2025 fiscal year, forecasting total revenue of around SR1.18 trillion ($315.73 billion), down 4 percent from previous forecasts.

These estimates are based on a baseline scenario ranging from low to high and are designed to address the challenges and geopolitical risks impacting the global economy.

The ministry emphasized that this strategy allows the government to maintain a flexible budget framework.

Preliminary estimates for total spending are SR1.28 trillion, resulting in a projected budget deficit of SR101 billion, which is 38 percent higher than previous estimates.

This deficit of 2.3 percent of gross domestic product is considered expected and is likely to continue in the medium term due to the continued expansionary spending policy.

Commenting on the outlook, Finance Minister Mohammed Al-Jaadan said: “The preliminary budget statement for the fiscal year 2025 confirms that the Government of Saudi Arabia will continue to focus its spending on essential services for citizens and residents, as well as on the execution of strategic projects to promote the economic growth and achieving sustainable development.”

The ministry also released revised estimates for fiscal year 2024, expecting revenue of SR1.24 trillion, up 6 percent from previous forecasts.

Spending is expected to reach SR1.35 trillion, an increase of 8 percent, resulting in a deficit of SR118 billion, largely due to higher spending.

The fiscal year 2025 budget is in line with Saudi Vision 2030 by advancing tax and economic reforms. The government aims to balance its strong fiscal position, fiscal reserves and low public debt while improving spending efficiency and prioritization.

Key areas of focus include accelerating projects that promote sustainable economic growth and adapting other projects to stabilize and diversify the economy. The budget prioritizes improvements in social services, social protection and regulatory reforms.

Additionally, there is a focus on transformative spending, leveraging government resources, and strengthening the private and nonprofit sectors. Key initiatives under Vision 2030 aim to develop promising sectors, attract investments, boost local industries and expand non-oil exports.

Notable progress has been made in promoting tourism and entertainment, supported by the Public Investment Fund and National Development Funds, driving robust and sustainable growth in non-oil sectors and positioning the Kingdom for long-term economic resilience.

To support stability and balance in oil markets, Saudi Arabia and OPEC+ implemented a reduction in oil supplies, bringing the kingdom's average production to 8.96 million barrels per day from the start of fiscal 2024 to the end of July.

According to the ministry, OPEC+ countries have concluded a new production agreement for the 2025 fiscal year, which will apply from January to December.

Several member states, including Saudi Arabia, Russia and the United Arab Emirates, have agreed to extend voluntary production cuts. This includes a 1.65 million bpd cut, originally announced in April 2023 and now extended until December 2025, and an additional 2.2 million bpd cut, extended until November 2024.

The ministry noted that these reduced volumes will be gradually restored on a monthly basis through November 2025, with adjustments made according to market conditions to ensure stability.

According to the official data, real GDP is expected to grow by 0.8 percent in 2024, supported by forecast growth of about 3.7 percent in non-oil activities.

Private consumption rose by 2.4 percent in the first half of 2024, supported by growth in wholesale and retail trade as well as in the catering and hotel industries. Easing visit visa procedures and expanding eligible categories have also increased visitor numbers to entertainment, cultural events and tourist destinations.

The average consumer price index rose 1.6 percent from the beginning of 2024 to August compared to the same period last year. Preliminary forecasts assume that the consumer price index will reach around 1.7 percent for the full year.

The Kingdom has maintained acceptable levels of inflation compared to global standards, reflecting continued improvement in economic conditions and proactive government measures to control rising prices, including price caps on gasoline and improving food supplies.

Financing plans

Saudi Arabia's sound fiscal position, characterized by strong financial reserves and manageable public debt, enables the Kingdom to effectively manage potential economic shocks and secure short, medium and long-term financing.

The Ministry of Finance, through the National Debt Management Center, develops an annual credit plan aimed at ensuring debt sustainability, diversifying sources of financing and providing access to global markets. This strategy is in line with Saudi Arabia's Vision 2030, which promotes growth in the financial sector and deepens the domestic debt market.

The kingdom is expanding its financing channels through bonds, sukuk and loans while working to improve its sovereign's creditworthiness.

According to the ministry, controlled debt growth supports the expansionary spending needed to achieve Vision 2030 goals, ensuring financial sustainability and resilience to future challenges.

Fitch Ratings affirmed Saudi Arabia's A+ rating with a stable outlook, while Moody's maintained its A1 rating with a positive outlook. Additionally, S&P Global Ratings affirmed its A rating for the kingdom and upgraded its outlook to positive from stable.

These ratings reflect the country's ongoing economic transformation, driven by structural reforms and fiscal policies that prioritize sustainability and efficient financial planning.