Contractors confident on Saudi public spending in 2015

30 December 2014

The 2015 budget aims to alleviate fears over oil prices

Contractors working in Saudi Arabia say they do not fear the repercussions of ailing oil prices and are expecting their core business in the kingdom to remain fruitful.

“We will not feel the effects of oil prices until at least 2016, for now there have been enough projects announced and planned for the coming year to keep everyone happy,” says Karim El-Shennawy, business development manager at Al-Shafar General Contracting (ASGC).

Shennawy also went on to talk about ASGC’s plans to continue their expansion into the kingdom. “We will continue to look towards winning more contracts in Saudi Arabia, and we are confident that the kingdom will continue all planned and proposed projects.”

Government revenues may be reduced dramatically, but a fiscal surplus and huge reserves means public spending can continue according to ministry officials who have also confirmed all planned projects will proceed with no limitations.

While ongoing projects may not be affected, there are fears that there will be a slowdown in new projects this year. Despite this, Jadwa Investment analysts claim that the overall planned budget increase “sends an important message to the private sector that the fall in oil prices will not prevent the government from implementing and expanding on its investment plans”.

Saudi Arabia’s 2015 budget expects revenues to fall by $88bn to $190.7bn in the next 12 months, lower than$278.9bn total from 2014.

The shortfall will be made up from government savings accrued over the last four years as a fiscal deficit of $38bn is expected.

Oil prices continue to sit just below $60 per barrel and as a result the Saudi economy has been on a knife edge in recent months as industries affected look to the authorities for clarity.

The Saudi budget was meant to provide that clarity, at least for the next 12 months and, it seems while revenues are decreasing, public spending continues to drive on.

The ministry of finance announced that the core areas of spending will continue to be on health and social initiatives, up 48% from last year at $42bn. Education spend is also going to increase by 3% to $57bn while transportation and infrastructure will decrease by 5% at $16bn. According to the ministry of finance $8.9bn of this will go on building new roads, upgrading ports and airports.

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