Saudi budget goes back to school with ongoing reforms

Saudi budget goes back to school with ongoing reforms

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The budget deficit is slated to finance investments geared at diversifying the economy away from its dependence on oil in line with the Kingdom’s Vision 2030. 
With some 16.1 percent of the overall budget, Education will take up a big part of the total spend, which again is necessary to train a young population which is about to enter the workforce (58.5 percent of Saudis are under the age of 30). 
Unemployment fell by 0.4 percent reaching 12.3 percent in 2019.
GDP growth for 2020 is estimated at 2.3 percent. Oil revenues constitute the lion’s share of Saudi Arabia’s exports. This renders the agreement reached by OPEC+ (the OPEC nations and their 10 non-OPEC allies) to cut production by 1.7 million bpd through March significant, especially as it has so far stabilized the oil price in the mid-$60 per barrel range. 
The higher than expected budget deficit for 2019 could in part be blamed on lower than expected oil revenues due to lackluster oil price development for some of 2019.

This year’s budget places a big emphasis on private sector development and privatization, which in part explains no increases in overall taxation.

Cornelia Meyer

This year’s budget places a big emphasis on private sector development and privatization, which in part explains no increases in overall taxation.
Other highlights are that the PIF will continue to play a leading role in investing in projects which underpin Vision 2030. 
Tourism’s contribution to GDP growth will also increase facilitated, by new tourism visa programs. 
Finally, the proceeds of the Aramco IPO will also be used to support investments in projects supporting the Kingdom’s economic and social reform agenda.
All in all, the budget is realistic and consistent with the economic roadmap laid out for the country in Vision 2030.
• Cornelia Meyer is a business consultant, macro-economist and energy expert. Twitter: @MeyerResources

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