Finance minister’s pre-budget statement paints rosy picture of Saudi economy

Finance Minister Mohammed Al-Jadaan speaking to media in Riyadh. (AN photo by Ahmed Fathi)
Updated 01 November 2019

Finance minister’s pre-budget statement paints rosy picture of Saudi economy

  • Efforts to develop and grow role of private sector in Kingdom continue to pay off

RIYADH: Saudi Finance Minister Mohammed Al-Jadaan on Thursday said government expenditure is expected to be SR 1,020 billion in 2020. Efforts will be made to improve the efficiency of spending without any disruption to diversification and transformation plans, he added. Revenues are projected to be about SR 833 billion in 2020, with a budget deficit of about 6.5 percent of GDP.

The figures were revealed in the minister’s pre-budget statement for fiscal year 2020. It gave details of developments in public-finance performance during 2019, and set out the main fiscal objectives and economic estimates for 2020 and the medium-term future. It also highlighted the key initiatives and programs that will be implemented during the coming fiscal year within the framework of Saudi Vision 2030.

Al-Jadaan said that the Kingdom’s fiscal policy aims to strike a balance between maintaining fiscal sustainability and enhancing economic growth and development, while also supporting economic transformation in line with Vision 2030. It does this by striving to increase efficiency and effectiveness within the framework of fiscal discipline, improving the basic services provided to citizens, diversifying government revenue sources and empowering the private sector.

The cabinet's approval of the government’s Tenders and Procurement Law will ensure fairness and transparency, promote competition, prevent the influence of personal interests, protect public money and provide fair treatment to competitors, he added, which will help to ensure equal opportunities.

The minister also said that the preliminary economic results and indicators reflect significant progress in the past year. Real GDP achieved a positive growth rate of about 1.1 percent in the first half of 2019, helped by the growth of the non-oil sector by 2.5 percent in the same period. Initial estimates indicate that GDP is expected to grow by 0.9 percent in 2019, with non-oil GDP growth rates expected to accelerate. Performance is expected to continue to improve in 2020, with GDP growth projected to reach 2.3 percent.

Total expenditure in 2019 is expected to be SR 1,048 billion, Al-Jadaan said, as the government aims to achieve fiscal discipline and stability as key objectives for sustainable economic growth in the medium term. Revenues for fiscal year 2019 are expected to be SR 917 billion, representing 1.2 percent growth compared with 2018, he added. The ratio of non-oil revenues to non-oil GDP is expected to increase to 16 percent by the end of 2019, compared with 7 percent in 2012.

“The budget deficit is expected to continue to decrease in this fiscal year 2019, reaching 4.7 percent of GDP, compared with 5.9 percent last year,” said Al-Jadaan.

He added that the 2020 budget will continue to implement programs and initiatives designed to strengthen the role of the private sector in the economy as the main driver of economic growth and job creation. Currently, there are 22 support initiatives for the private sector, including cash subsidies, commitments and financing guarantees, offered by entities such as the Ministry of Finance, the Ministry of Housing and the General Investment Authority.

Al-Jadaan said that the 2020 budget will continue efforts to improve the efficiency of public-finance management to maintain fiscal sustainability and maximize return on expenditure. This takes into account the potential effect of domestic and international developments during budget execution, he added.

“The 2020 budget will also focus its expenditure on Vision 2030 realization programs, which represent the main tool to realize economic transformation objectives, including housing programs, the quality of life program, privatization program, mega projects, private-sector stimulus packages and other major projects across various sectors,” the minister said. These projects will help to support non-oil GDP growth in 2020 and over the medium term, he added.

The implementation of these programs and initiatives has led to performance improvement in a number of sectors, Al-Jadaan said, the most notable of which is construction. It returned to positive growth in 2019 after declining during the previous three years.

In general, the economy has resumed positive and high growth across a number of economic sectors.

“In the first half of 2019, wholesale, retail-trade, restaurants and hotels, and finance, insurance, and real-estate activities grew by 3.8 percent and 5.1 percent respectively compared with the same period last year,” said the minister.

Transport, storage and communication, and community, social and personal services activities, including arts and entertainment, increased by 5.6 percent and 5.9 percent respectively compared with the same period in 2018.

The government is continuing its efforts to develop local content, enhance the competitiveness of the economy and improve the business environment, said Al-Jadaan. He noted that the non-oil private sector experienced positive growth during the first half of 2019 for the first time in three years, supported by policies designed to stimulate the private sector.

He said that releasing a pre-budget statement for a second consecutive year highlights the government commitment to reinforcing governance and controls on public finance, while enhancing the policy of financial disclosure by strengthening transparency principles.

With this in mind, the Kingdom recently joined the International Monetary Fund’s Special Data Dissemination Standard, which is considered one of the best international standards in the dissemination of national fiscal and economic data.

“This is an important step on the Kingdom's path to enhancing fiscal disclosure and transparency in accordance with international standards,” said Al-Jadaan.
 


Food for thought as Aramco’s Amin Nasser hosts Davos

Updated 7 min 23 sec ago

Food for thought as Aramco’s Amin Nasser hosts Davos

  • The theme of the reception was “the art of the possible,” aiming to highlight Aramco’s huge investment in energy technology
  • Among the foreseen events were the release of audited reserves estimates showing Aramco — officially — as the world’s biggest oil company

DAVOS: Rapidly becoming a highlight of the hectic Davos calendar is the Saudi Aramco reception and dinner, held for the past two years now at the InterContinental Hotel on the outskirts of the Alpine resort.

The egg-shaped InterConti is one of the bigger and newer establishments here, very different in style from most of the other traditional Swiss hotels. It exudes corporate power and influence and is a fitting venue for the most valuable company in history to host friends, clients and would-be partners for a few informal hours.

On Wednesday, the hotel was virtually an extension of Riyadh. In addition to the Aramco event, there was also a big presence by the Saudi Arabian General Investment Authority (SAGIA), with its slogan “Saudi Arabia: Now Live” in prominent view in the bustling lobby.

The Aramco event — hosted of course by chief executive officer Amin Nasser — was a gathering of some of the most powerful people in the Kingdom, as well as a number of the great-and-good of the energy world and representatives of the global elite.

The Saudi Energy Minister Prince Abdul Aziz bin Salman chatted amiably with guests, none the worse for wear from the door-stepping he had got from the Western press earlier in the day, which had caused a storm of disapproval on Saudi domestic media. He had a few words for everyone.

Yasir Al-Rumayyan, governor of the Saudi Public Investment Fund and chairman of Armco, was in attendance too, enjoying the refreshments and canapes of the gathering.

The theme of the reception — held in the InterConti’s cavernous basement function hall — was “the art of the possible,” aiming to highlight Aramco’s huge investment in energy technology, its big global research and development commitment, and its awareness of climate-change issues. “We are more than just a petrol pump,” was the message.

One neat synergy between traditional Saudi life and modern technology was the story of Mohamed Amanullah, leader of Aramco’s Advanced Research Center, who devised a way of using discarded date seeds — suitably processed — as a filter in the oil-drilling process. “It shows heritage and sustainability in one place,” an Aramco aide explained.

The highlight of the soiree was an address from Nasser, who took the stage to thank guests for making the trek to the InterConti. He noted that Davos 2020 had the highest number ever of Saudi delegates.

“Last year was an exceptional year for Aramco, in a variety of areas; some of them planned, some not predicted,” he told the audience.

Among the foreseen events were the release of audited reserves estimates showing Aramco — officially — as the world’s biggest oil company; the record-breaking bond issue in spring; the finding by scientific experts that the Kingdom had the cleanest crude of any of the oil majors; and, of course, the biggest initial public offering in history last month and market recognition of the fact Aramco is the biggest listed company in the world.

Some unplanned events were also mentioned, notably the attacks on Aramco facilities last September that briefly halted most of the Kingdom’s oil industry, but which was overcome with rapid efficiency. The oil price spike was short lived.

“Our job is to fulfill the global need for affordable energy,” Nasser said, highlighting Aramco’s “responsibility and moral obligation” to help alleviate energy poverty in poorer countries, especially in sub-Saharan Africa.

Nasser finished with a pledge that Aramco’s hi-tech capabilities will be enhanced and expanded for the benefit of the world. “I am confident that we can use technology to remove carbon dioxide emissions and methane from the atmosphere,” he said.

That is a mission worthy of the biggest energy company on the planet and provided food for thought for the rest of the Davos evening.