The era of double-digit increases in the budget each year in Saudi Arabia is coming to an end
Between 2007 and 2012, government spending in Saudi Arabia rose by 64 per cent as Riyadh embarked on an aggressive spending programme aimed at updating its infrastructure and trying to appease its citizens as they watched rebellions erupt around the region.
During the same period, government revenue rose by only 12.5 per cent. Although that still leaves Riyadh sitting on healthy surpluses and vast savings, the ramp up in spending is unsustainable.
There is now some recognition of this and spending growth this year is set to slow to just 2 per cent. Some forecasts suggest spending may fall in 2014. Several factors are driving this. In the short term, oil revenue is set to drop as Opec cuts production quotas to shore up prices. There are also increasing concerns about the long-term oil price in the wake of shale oil discoveries, most notably in the US.
A raft of changes at ministerial level has created a sense of institutional inertia as new ministers get to grips with new responsibilities. Riyadh is also now much more focused on sustainability. Mohammed al-Jasser, economy and planning minister since 2011, says sustainability and counter-cyclical investment must be the guiding principal for Riyadhs budgeting.
The challenge is taking action in a politically tense environment. The decision seems to be that while new infrastructure is vital for the economy in the long term, some of it may have to wait in the name of political stability.
You might also like...
Adnoc Offshore awards Upper Zakum contract
17 April 2024
Oman awards Batinah coastal road contract
17 April 2024
Oman appoints Al Khuwair Downtown project manager
17 April 2024
A MEED Subscription...
Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.