Saudi Arabia plans 7.5% spending cut in 2021

Saudi Arabia plans to cut spending by 7.5 percent to SR990 billion ($263.9 billion) in the financial year (FY) 2021 in a bid to reduce its deficit, the kingdom’s Ministry of Finance said in its preliminary budget statement.

This compares to a spending of SR1.068 trillion this year.

The kingdom expects a budget deficit of about 12 percent this year, falling to 5.1 percent next year, the report said.

The document estimates that the real GDP will record a decline of 3.8% in FY2020 with an estimated better performance during H2, as reflected in local demand indicators. IMF had estimated the contraction to be 6.8%.

The statement estimates the economy will swing back to growth in 2021, growing by 3.2%, partly because of the "continued improvement in containing the pandemic."

The document cautioned that the budget is usually approved in December and may vary from the content of the document in light of new fiscal and economic developments.

Despite the negative impact on the kingdom's non-oil growth this year and the consequent increase in the budget deficit against what was planned, with the kingdom's commitment to spending levels to support the domestic economy, the outlook is better than what was anticipated during the first half, especially after the gradual opening of economic activity and the decline in the spread of the Covid-19, it said.

The total revenues this year are expected to reach SR770 billion, a decrease of 16.9% compared to the previous year. The revenues are expected to increase to SR846 billion in 2021, it said.

As a result of the crisis and the additional spending, total expenditure for FY2020 is expected to exceed approved budget of SR1.02 trillion to reach SR1.068 trillion, the document added.



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