In the first quarter of 2024, Saudi Arabia reported a budget deficit of 12.387 billion riyals, mainly due to lower oil revenues and increased spending impacting the economy. The kingdom is in need of significant funding for various projects aimed at reducing its dependence on oil and stimulating sectors such as tourism and the private sector. Despite some growth in non-oil revenues, oil revenues still dominate, reaching 181.922 billion riyals out of total revenues of 293.433 billion riyals.
Public spending in the first quarter exceeded last year’s figures, reaching 305.820 billion riyals as compared to 283.855 billion riyals previously. With the price of international Brent crude averaging around $83.50 in 2024, Saudi Arabia’s breakeven oil price for its budget is forecasted to be $96.2 by the IMF. The country has projected a total annual budget deficit of 79 billion riyals for the year and has indicated that it will adjust some of its giga projects to deal with the financial challenges.
Saudi Arabia’s Finance Minister, Mohammed Al Jadaan, has acknowledged the difficulties the country faces and has expressed a willingness to adapt by changing course, scaling back or extending projects as needed. The Organisation of the Petroleum Exporting Countries and allies (OPEC+) are expected to maintain production curbs to stabilize the market, which should help improve Saudi Arabia’s budgetary situation. Economists like Monica Malik predict that the overall fiscal position of Saudi Arabia will benefit from higher oil prices in the second quarter of 2024, leading to a smaller deficit than initially projected for the year.
In conclusion, while Saudi Arabia faces a challenging economic environment with a budget deficit in the first quarter of 2024, the country is making efforts to address the situation by adjusting spending and projects. With oil revenues still playing a dominant role, the kingdom is working towards diversifying its economy to reduce reliance on oil and boost other sectors like tourism and the private sector. By adapting to changing circumstances and market conditions, Saudi Arabia aims to improve its fiscal position and reduce its budget deficit in the coming quarters.
