Riyadh will increase government spending in 2018 as it relaxes the pace of economic reform and increases spending on projects in the kingdom.

The 2018 budget was approved on 19 December, and includes SR978bn ($261bn) of public spending, which is an increase of 5.6 per cent on 2017. The budget announcement also said with spending from the Public Investment Fund (PIF) and the National Development Fund, total public expenditure will exceed SR1.1 trillion.

Crown Prince Mohammed bin Salman al-Saud said in a statement that SR338bn of total public expenditure in 2018 will be capital expenditure. Some SR205bn will come directly from the state, while it is anticipated that the PIF will spend SR83bn on new and existing projects in 2018. The fund has launched a series of major projects during 2017 including the $500m Neom City project, and has also taken over the development of King Abdullah Financial District.

The National Development Fund will spend SR50bn on housing, industrial and mining projects.

Despite the increase in spending, has a reduced budget deficit of SR195bn, or 7.3 per cent of nominal GDP next year, which is lower than the deficit of 8.9 per cent of GDP for 2017.

This has been achieved by boosting revenues. Total revenue is estimated at SR783 billion, an increase of 12.6 per cent on what is expected for 2017. Non-oil revenues will increase by 14 per cent, and together with debt instruments, will account for more than 50 per cent of government revenues in 2018. Levels of debt will be managed, and the target is for it to remain below 30 per cent of GDP.

Real GDP growth in 2018 is to reach 2.7 per cent.