The Ministry of Finance announced today, Thursday, September 30, 2022, the Pre-Budget Statement for the Fiscal Year 2022, alongside the release of the Mid-Year Fiscal and Economic Performance Report FY 2021, amid estimates that the total expenditures will reach SAR 955bn during 2022, with the continuation of the work on enhancing the spending efficiency; maintaining fiscal sustainability; achieving the objectives of Vision 2030; implementing the economic and fiscal reforms as well as the Vision 2030 programs, initiatives, and mega projects; reprioritizing based on developments in line with the requirements of the period; creating further investment opportunities for the development funds and the private sector; and privatizing some government services and programs and developing infrastructure projects.
The Pre-Budget Statement projects that the gradual return to the recovery of the Kingdom’s economy will lead to positive developments on the revenues for the year 2022 and over the medium-term, as it is estimated that revenues will reach SAR 903bn. It is also projected that the government’s continuous efforts to diversify the economy through the implementation of numerous programs and initiatives that are directly related to the realization of the objectives of Vision 2030 leading to the continued growth of revenues that propels them to SAR 992bn in the year 2024. This is also driven by the expectation of the recovery of the domestic and global economies over the medium term after the effects of the Coronavirus Pandemic subside and fade.
His Excellency, Minister Mohammed Al-Jadaan, explained that as part of the government’s effort to achieve the fiscal objectives, initial expenditure ceilings will be maintained for the next fiscal year, FY2022, and over the medium term, in a manner that reflects the approach taken in the fiscal policies that support raising the spending efficiency. His Excellency pointed out that the effective role of the Public Investment Fund (PIF) and the development funds, the introduction of the Privatization Program, the creation of further opportunities for the private sector to participate in the infrastructure projects, and the continued push to develop the management of the public finance will contribute to raising the efficiency and effectiveness of the spending levels.
His Excellency pointed out that despite the fact that the Coronavirus Pandemic still persists and that the new Covid-19 variants are affecting the economic movement, the growth rates and the volume of global demand, controlling the deficit rates in the 2022 Budget is going according to plan as it is estimated that the deficit will be 1.6% of the GDP, with an estimated amount of SAR 52bn, noting that this deficit is expected to decrease gradually amid the expectations of achieving surpluses in the Budget starting from the year 2023.
His Excellency commended the manner in which the government continues to deal with the pandemic professionally and with exceptional performance, in light of the precautionary measures that the government has taken to limit the spread of the virus through containing the numbers of Covid-19 cases, enhancing the efficiency of the health system, making the vaccines available to all citizens and residents, and the substantial investment in the infrastructure and supply chains.
His Excellency noted that the initiatives to revitalize the economy and support the private sector contributed to the speed with which the economy responded. In the first half of 2021, the non-oil GDP recorded a growth of 5.4% supported by the growth in the private sector GDP of 7.5%. His Excellency explained that estimates indicate a real GDP growth of 2.6% during the current year 2021, driven by a 4.2% growth in non-oil GDP.
His Excellency explained that the estimates indicate that the real GDP of the year 2022 will achieve a growth of 7.5%, driven by the growth of non-oil GDP and the oil sector as a result of the expectation of increasing the Kingdom's share of oil production starting May 2022 as per OPEC+ agreement, recovery in global demand and improving in global supply chains. It is also expected that the positive growth of GDP will continue in the medium term, driven by the growth of the non-oil sector.
Mr. Aljadaan pointed out that there are several factors that support the non-oil GDP growth rates such as the continuous progress in the implementation of the Vision realization programs and their initiatives and mega projects, the development of the promising sectors in the economy, the progress made in the implementation of the various initiatives that target enhancing investment, and the stimulation of industry and non-oil exports, in tandem with the gradual return of some key activities to their pre-pandemic levels, the recovery of the global economy and demand and the continuation of the gradual implementation of the structural reforms over the medium term in line with the Vision 2030.
His Excellency emphasized that the government continues to maintain the fiscal sustainability and enhance the Kingdom’s fiscal position, as the government targets a total public debt of SAR 989bn during 2022, which amounts to 31.3% of the GDP compared to 30.2% in the year 2021, with flexibility in dealing with the financing needs based on the developments in the markets. It is also estimated that the ratio of debt to nominal GDP will decrease reaching 27.6% in 2024 with the expectation that it will remain unchanged in the medium term as a result of the expectation that surpluses in the budget will be achieved starting from 2023 and the utilization of issuances will be directed towards principal repayment. Fiscal strategy also aims to enhance the government’s fiscal position via maintaining appropriate government reserves to enrich the Kingdom’s ability to deal with shocks.
His Excellency pointed out that the National Transformation Program has contributed, since its launch, to realized many crucial and influential achievements in developing government systems and improving services provided to citizens, such as developing justice services, upgrading health care, improving the urban landscape and developing the Kingdom's infrastructure; establishing salt water desalination plants and developing its integrated network; facilitating doing business, expanding digital transformation and innovation, regulating labor market and raise its attractiveness; empowering women and increasing their participation in the workforce; developing the non-profit sector; and developing tourism sector.
H.E. Aljadaan indicated that the Vision Realization Programs contributed to enabling Saudi families to own a home by facilitating home-ownership procedures with immediate entitlement to obtain a subsidized real estate loan, through an effective partnership with the private sector. He added that the Housing Program continues, through the coming period, its efforts to raise the Saudi families’ home ownership percentage to reach 70% by 2030, compared to 62% in 2020, through serving larger segments of society, targeting the most in need groups and increasing its attractiveness for private sector investments to ensure its stability and sustainability.
H.E. added that the Privatization Program aims, in 2022, to continue providing opportunities for privatization, supporting public-private partnership on the domestic and international levels in numerous sectors, chief among them; water, health, housing, and media sectors. The program also targets increasing the private sector’s contribution to the GDP from 40% to 65% by 2030. In addition, the private sector is expected to continue to grow at a higher rate than before to lead economic growth and create jobs for both male and female citizens.
His Excellency the Minister of Finance concluded his statement by emphasizing that the government will continue during 2022 to implement initiatives and reforms announced during the past years to complement the economic and fiscal reforms process undertaken by the government to contribute towards realizing Vision 2030 objectives. This is in tandem with supporting the continued implementation of economic transformation plans and funding social-related expenses. He noted that, under the umbrella of the Council of Economic and Development Affairs, the work is ongoing to prepare strategy for the subsidy and social benefits ecosystem that has two main parallel tracks, one of which focuses on developing policies, and the other track focuses on the budget to ensure better targeting mechanism. Both tracks will assure achieving the strategic objectives out of this ecosystem.
The Pre-Budget Statement for FY 2022 in line with the national policy to enhance budget preparation process by integrating it within a comprehensive fiscal and economic framework for the medium-term. This is expected to not only facilitate multi-year fiscal planning but also enhance transparency and fiscal disclosure. The Pre-Budget Statement aims to inform the citizens, interested parties, and analysts of the main fiscal objectives and economic indicators estimates for Fiscal Year 2022 and the medium term. The statement also briefly explores key initiatives and programs that will be implemented during the coming fiscal years. The budget is usually approved in December of each year and may include adjustments to the contents of this pre-budget statement in the light of fiscal and economic developments.