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

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

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.
 


More jobs advertised for Saudis by Royal Commission for Jubail and Yanbu

More jobs advertised for Saudis by Royal Commission for Jubail and Yanbu
Updated 18 min 21 sec ago

More jobs advertised for Saudis by Royal Commission for Jubail and Yanbu

More jobs advertised for Saudis by Royal Commission for Jubail and Yanbu
  • The Kingdom has stepped up efforts to secure more jobs for its citizens in line with similar localization efforts underway elsewhere in the region

RIYADH: The Royal Commission for Jubail and Yanbu (RCJY) has advertised 96 jobs for Saudis on its website, in Riyadh, Jazan, Jubail and Yanbu.
They cover administrative, engineering and health roles.
Among the advertised positions are a financial planning specialist, director of transportation and equipment department, director of buildings department, and director of public facilities department.
The Kingdom has stepped up efforts to secure more jobs for its citizens in line with similar localization efforts underway elsewhere in the region.
The Royal Commission for Jubail and Yanbu (RCJY) was established by royal order in 1975 to kickstart the Kingdom’s petrochemicals industry.


WH Smith to open at King Abdulaziz International Airport in Jeddah

WH Smith to open at King Abdulaziz International Airport in Jeddah
Updated 41 min 50 sec ago

WH Smith to open at King Abdulaziz International Airport in Jeddah

WH Smith to open at King Abdulaziz International Airport in Jeddah
  • Airport retail may rebound on travel resumption
  • Pandemic culls names across retail sector

DUBAI: British retailer WH Smith is coming to King Abdulaziz International Airport in Jeddah.
Tihama Advertising, Public Relations and Marketing Company has agreed a deal with the General Authority of Civil Aviation to lease two units at the airport, it said in a Saudi stock exchange filing.
Tihama Education, a unit of the Tadawul-listed company, will operate two outlets under the WH Smith brand franchise, covering arrivals and departures.
Tihama has an existing partnership with WH Smith at Riyadh Airport and in the UAE.
WH smith did not respond to a request for comment.
Founded in 1792, WH Smith is one of the oldest names on the British high street and has also become one of the world’s leading travel retailers operating over 1,100 stores in 31 countries.
Retailers have suffered from the impact of more than a year of intermittent lockdowns worldwide but the transport-focused end of the retail business may stand to benefit from a resumption of international air travel.
Analysts at RBC upgraded WH Smith to ‘outperform’ from ‘sector perform’ last week and lifted their price target on the stock to 2,200p from 2,100p.


Surge in demand for companies looking to set up in KSA

Surge in demand for companies looking to set up in KSA
Updated 21 April 2021

Surge in demand for companies looking to set up in KSA

Surge in demand for companies looking to set up in KSA
  • Consultants have seen a 50 percent rise in activity in the first quarter of 2021

RIYADH: Sovereign AEI, a firm which specializes in helping companies set up operations in the Kingdom, has seen a spike in business activity.

“The beginning of this year has been very encouraging as we have seen a 40 to 50 percent increase in Saudi Arabia market-entry activity, when compared to pre-pandemic levels,” Stuart D’Souza, co-founder and CEO of Arabian Enterprise Incubators (AEI), one of the partner firms that makes up Sovereign AEI, told Arab News.

As part of the ambitious Riyadh Strategy 2030 announced by Crown Prince Mohammed bin Salman earlier this year, the government wants to attract up to 500 international companies to set up their regional bases in the city, create around 35,000 new jobs for Saudi locals, and double the capital’s population.

The strategy aims to invest up to SR70 billion ($18.67 billion) into the national economy by the end of the decade. The strategy is already paying dividends.

“Sovereign AEI is helping to facilitate this new strategy. Our products and services are conducive with Riyadh Strategy 2030 by helping new and existing businesses capitalize on the expected significant growth forecast for the Kingdom,” Paul Arnold, managing director of Sovereign Saudi Arabia, told Arab News.

BACKGROUND

• The government wants to attract up to 500 international companies to set up their regional bases in the city, create around 35,000 new jobs for Saudi locals, and double the capital’s population.

• The strategy aims to invest up to SR70 billion ($18.67 billion) into the national economy by the end of the decade. The strategy is already paying dividends.

“We are also encouraging businesses to look ahead and establish a physical presence in the Kingdom, while taking into consideration new criteria set to come into force by 2024, the specifics of which are yet to be formally announced,” he added.

Sovereign has been operating in Saudi Arabia for about 20 years and AEI since 2012. They formed their joint partnership in 2019.

In 2019, the company helped 600 businesses visit Saudi Arabia to investigate potential opportunities. Half were first-time visitors and over 70 percent went on to establish new business links in the Kingdom. AEI alone has helped over 1,500 foreign businesses to enter, establish or expand in Saudi Arabia since 2012.

Last year, despite the restrictions as a result of the pandemic, Sovereign AEI reported a 300 percent increase in corporate services in Saudi Arabia. The team is expecting this positive growth to continue in 2021.

“The Saudi market presents tremendous opportunities. Most companies are now aware of the potential of the market, the main pillars of Vision 2030 and the significant number of economic reforms carried out over the past 18 months. However, plotting a road map to success can be a challenge,” Arnold said.

“Our principles are to educate, de-risk and enable the client’s ability to enter, establish or expand in the Kingdom. Our robust performance in the first quarter is a testament to the attractive nature of the Saudi market and we continue to see a growing interest and increasing shift of client focus toward the Kingdom, as the country continues to unveil new strategic initiatives,” he added.


New oil price surge caps year of recovery since ‘Black Monday’

New oil price surge caps year of recovery since ‘Black Monday’
Updated 21 April 2021

New oil price surge caps year of recovery since ‘Black Monday’

New oil price surge caps year of recovery since ‘Black Monday’
  • Anniversary of US crude plunging to minus-$40 at start of pandemic recession

DUBAI: Oil prices resumed their surge on global markets on Tuesday as traders shrugged off the memory of “Black Monday” 2020, when some crude prices went into negative territory at the start of the pandemic recession.
Brent crude, the global benchmark, went above $68 a barrel for the first time in over a year, while West Texas Intermediate, which approached minus-$40 at the depth of the oil crisis exactly a year ago, leapt above $64.
The resurgence in the oil price — which has seen some experts suggesting the possibility of a “supercycle” in which crude goes back above $100 a barrel — is partly down to improved prospects as the global economy moves outs of pandemic lockdowns.
The global rollout of coronavirus vaccines has led economic experts to predict a sharp recovery in growth in 2021, with the International Monetary Fund recently forecasting a sharp rise in economic activity for the rest of the year. China last week said its economy had grown by 18.3 percent in the first quarter of the year.
But oil analysts believe the actions of OPEC+ — the producers’ alliance led by Saudi Arabia and Russia —had been the biggest factor in helping reduce the huge glut of oil that threatened to swamp the world market last spring.
Since last April, OPEC+ has taken more than 3 billion barrels of oil off the global market, through a combination of strong internal discipline and voluntary cuts by Saudi Arabia, the world’s biggest exporter.
Prince Abdul Aziz bin Salman, the Saudi Energy Minister and co-chairman of OPEC+, has repeatedly urged caution on the 23-member organization as COVID-19 cases re-emerge in some parts of the world. Europe and India are the latest causes of concern.
“The reality remains that the global picture is far from even, and the recovery is far from complete,” he told the last OPEC+ meeting.
The oil price bulls are encouraged by increasing demand from China, the biggest oil consumer in the world.
Figures from the country’s customs regulator, released on Tuesday, showed that crude oil imports from Saudi Arabia — its biggest supplier — had risen by nearly 9 percent in March, with strong domestic demand bolstered by a freeing up of supplies after port congestions.
Some analysts still believe Brent crude could hit $75 this year, and reckon $100 a barrel next year is a possibility.
But nobody appears to believe the volatile market conditions of last spring, and negative oil prices, will happen again.
Robin Mills, chief executive officer of consultancy Qamar Energy, told Arab News: “That was a pretty unusual set of circumstances.”
He added: “Never say never, and traders have short memories, but I think the fixes in place would make it unlikely to go negative again.”


Egypt targets investments of $80 billion

Egypt targets investments of $80 billion
Updated 21 April 2021

Egypt targets investments of $80 billion

Egypt targets investments of $80 billion
  • Plan forecasts 125 percent increase in funding for production sector

CAIRO: Egypt is aiming to raise EGP 1.25 trillion ($80 billion) as part of its investment plan for the fiscal year 2021/2022, according to the Egyptian Minister of Planning and Economic Development Hala Al-Saeed.

The investment plan forecasts a 125 percent increase in funding for the production sector, the minister said, along with a 30 percent increase for the country’s service sector.

Al-Saeed said the plan helps address the public spending commitments related to health and education and scientific research, as well funding for the continued efforts to combat the COVID-19 pandemic.

She said priority would be given to high-productivity sectors that drive sustainable economic growth in Egypt such as the manufacturing, communications, information technology and agriculture sectors.

According to the minister, the most important goals of the 2021/2022 sustainable development plan include addressing important social issues such as gender equality and public investments into green projects.