For the first time, Saudi Arabia acknowledges that some of the projects of its Vision 2030 plan to diversify its economy away from oil are being delayed to avoid pressures on the economy.
The Kingdom, the world's top crude oil exporter, needs more time to "build factories, build even sufficient human resources," Finance Minister Mohammed Al Jadaan told Bloomberg on Thursday.
"The delay or rather the extension of some projects will serve the economy," the minister added.
"There are strategies that have been postponed and there are strategies that will be financed after 2030," Al Jadaan told Bloomberg without specifying which projects are being delayed.
Saudi Arabia's economy shrank in the third quarter by 4.5% year-over-year, due to lower oil production and activities, the General Authority for Statistics of the world's top crude oil exporter said at the end of October. The flash estimates of the authority showed that lower oil activities dragged down the economy into the first quarterly decline since the beginning of 2021.
Earlier this year, the IMF said that Saudi Arabia's economy is set to markedly slow down this year from last year's 8.7% growth due to the oil production cuts the world's top crude exporter is implementing in a bid to "stabilize the market."
In the budget statement for 2024 issued this week, Saudi Arabia's finance ministry said that it expects a budget deficit of 1.9% of GDP for the 2024 fiscal year.
During the first half of 2023, Saudi Arabia's domestic product of oil activities decreased by 1.3% due to the voluntary cut of oil production, the ministry said.
Due to the voluntary oil production cuts, real GDP growth for FY 2023 is expected at just 0.03%, thanks to a 5.9% increase of non-oil activities.
The initial estimates for FY 2024 indicate a 4.4% growth of real GDP, again driven by the growth of non-oil activities GDP.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
Comments
Therefore, it is inevitable that when oil production and prices have declined this year that some projects being executed under the Saudi Vision 2030 will be delayed. In fact the Saudi budget shrank in the third quarter by 4.5 percent year-on-year because of the decline in production and prices.
However, prices aren’t going to remain subdued and are bound to resume their surge soon.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert