Improving oil prices narrowed Saudi Arabia’s budget deficit from 12.8 percent last year to 8.9 percent this year, and now Riyadh is expected to announce an increase in spending for 2018, Bloomberg reports.
Still, the Saudi economy has still not fully recovered, and GDP this year is forecast to fall by 0.5 percent, according to a Bloomberg poll among 14 analysts. That’s why the 2018 budget will include measures for economic expansion as well as steps aimed to offset the negative impact of austerity measures including lower fuel and electricity subsidies and taxes, including VAT.
The next year will be a very important one for Riyadh, with the initial public offering of the state oil company, Aramco, slated for the second half of 2018, when Saudi Arabia expects the global oil market to have returned to balance. Despite doubts surrounding the offering, official sources are unwavering in their insistence that everything is going as planned.
Aramco recently announced a surprising revision of its spending plans for the next ten years, raising its annual budget by 25% from last year’s plan, to some US$40 billion, or a total of US$414 billion for the period until 2027. A big part of the total will serve to maintain Aramco’s production capacity at the current 12 million bpd—the largest production capacity globally. Related: U.S. Solar Nearly Doubles Output In 2017
Meanwhile, however, the government—notably Crown Prince Mohammed—is moving forward with his Vision 2030 plan that should see the Saudi economy diversify away from its principal export commodity, and which depends on the success of the Aramco IPO.
Among the latest projects announced under the Vision 2030 plan is the Neom megacity that should turn Saudi Arabia into a tourist destination—the Kingdom is preparing to start issuing tourist visas for the first time in its history. Neom, according to Prince Mohammed, should contribute at least US$100 billion to Saudi GDP annually by 2030.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
- OPEC vs IEA: Who’s Right On Oil Prices?
- The Beginning Of The End For Norwegian Oil
- The Trillion Dollar Industry That Boosts Oil Consumption