Saudi Arabia plans to increase spending next year more than initially forecast as authorities take advantage of higher oil prices to spur economic growth and reduce unemployment.
Public spending is expected to reach 1.106 trillion riyals ($295 billion) in 2019, 100 billion riyals ($27bn) more than the government had projected last year, Finance Minister Mohammed Al-Jadaan said on Sunday. Authorities expect spending to rise to 1.170 trillion riyals by 2021, he said, citing initial estimates.
The world’s biggest oil exporter is grappling with an economic slowdown that followed the collapse of crude prices in 2014. Measures to reduce the budget deficit and raise non-oil revenue weighed on business sentiment, pushing the unemployment rate among Saudi nationals to its highest level in more than a decade.
Demand for Saudi oil is expected to increase as U.S. sanctions against Iran take some of its barrels off the market. Saudi Energy Minister Khalid Al-Falih told reporters in Algiers on Sept. 23 that demand for Saudi crude in October could range from 10.5 million to 10.6 million barrels a day, and the kingdom is able to supply this. It produced a near-record 10.4 million barrels a day in August, the country told OPEC.
Even though Saudi officials have made assurances that the kingdom can fill the gap, oil has already passed the $80 mark. Brent crude, the international oil benchmark, surged on Friday to a fresh four-year high above $83 a barrel.
Higher oil prices mean Saudi revenue estimates are “very conservative,” according to Mazen Alsudairi, head of research at Al Rajhi Capital Co. in Riyadh.
To reduce unemployment among Saudi nationals, the kingdom’s non-oil economy needs to expand between 3 and 4 percent a year, he said. That level is unlikely to be achieved before 2022, according to IMF projections.
Al-Jadaan said authorities expect “healthy growth” in both oil and non-oil industries. He said the government remains committed to supporting private businesses.
Source Credit: Arabian Business