The reduction in spending comes at a time when the largest oil exporter in the world is facing an economic downturn due to the emerging Corona virus (which causes Covid-19 disease) and low crude prices.
The Ministry of Finance said in a statement that the government aims, in the coming year, to maintain the financial and economic gains achieved in recent years, and to achieve the goals of stability, fiscal discipline, and spending efficiency.
The Saudi budget document said the economy will shrink by 3.8 percent this year, a more optimistic estimate compared to the International Monetary Fund’s forecast of a 6.8 percent contraction.
Riyadh expects the budget deficit to reach 12 percent for 2020, and decline to 5.1 percent next year.
It is expected that spending will decrease to 955 billion riyals in 2022, to 941 billion riyals in 2023, and that the deficit will shrink to 3 percent and 0.4 percent – respectively – in these two years.
Riyadh confirmed its commitment to achieving the goals of “Vision 2030” (the reform plan aimed at diversifying the economy rather than relying on oil revenues), but the plan’s programs will be subject to structural improvements while re-prioritizing them to stimulate growth.
The Kingdom expects total revenue to decline by about 17 percent this year to 770 billion riyals from 927 billion riyals in 2019, and then rise to 846 billion riyals in 2021.
The economy is expected to return to growth in 2021, to achieve a growth of 3.2 percent, supported by factors such as the continuous improvement in containing the emerging corona virus pandemic.
The document also indicated that the government sought to find more sustainable sources of revenue, in order to contain the negative repercussions of the Coronavirus crisis, pointing to a three-fold increase in the value-added tax, last July, to become 15 percent and increase customs duties on some goods.
But the tax has caused an increase in inflation, and economists say it will dent consumer demand, thus curbing the economic recovery.
For his part, Director of Macroeconomic Analytics at EFG Hermes, Mohamed Abu Basha, told Reuters: “We have a lower estimate of expected revenues in 2020 in light of the impact of Covid-19, and lower potential revenues from the increase in value-added tax. Due to lower consumption. ”
It is noteworthy that Saudi Arabia has 334,605 cases of the new Corona virus, of whom 4,768 died as a result of infection, while 319,154 infected people have recovered, as of now.
Also read: Serious disturbances and a battle for power … The Daily Telegraph reveals what is happening in Saudi Arabia and 50 thousand will be exiled
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