Saudi Arabia slashes growth forecasts, sees wider budget deficits

Saudi Arabia cut its growth forecasts and raised its budget deficit estimates for the fiscal years 2024 to 2026, looking ahead to a period of higher spending and lower projected oil revenues.

Real gross domestic product is now expected to grow 0.8% this year, a dramatic drop from a previous estimate of 4.4%, according to the latest pre-budget report published by the Ministry of Finance on Monday. The GDP growth projection for 2025 has also been cut from a previous estimate of 5.7% to 4.6%; while the outlook for 2026 has been trimmed from 5.1% to 3.5%.

"The FY2025 budget highlights the Kingdom's commitment to accelerate the regulatory and structural reforms, as well as the development of policies," the pre-budget report read. "It also focuses on transformative spending to promote sustainable economic growth, improve social development, and enhance quality of life."

The latest report further emphasized the Saudi government's plans to deploy sovereign and development funds "for capital investment while empowering both the private and non-profit sectors to foster growth and prosperity."

Saudi authorities also expect that the budget will remain in deficit for the next several years, as the kingdom prioritizes spending to achieve the targets of its Vision 2030 plan to modernize and diversify the heavily oil-dependent Saudi economy.

The Finance Ministry projected a wider budget shortfall of about 2.9% of GDP for 2024, compared with a previous projection of 1.9% for the year. It predicted deficits of 2.3% and 2.9% in 2025 and 2026, respectively, also wider than previous estimates.

Saudi Arabia's fiscal breakeven oil price — what it needs a barrel of crude to cost in order to balance its government budget — has increased in recent