The Saudi Ministry of Finance announced its preliminary estimates of GDP growth rates at constant prices (the Saudi economy) for the current and next three years.
According to the monitoring unit of the reports in Al-Eqtisadiah newspaper that was based on data from the Ministry of Finance, the ministry’s preliminary estimates indicate that the Saudi economy will grow by more than 3.2 percent over the next three years, while it expects a contraction of 3.8 percent this year due to the repercussions of Corona.
The ministry expects GDP growth of 3.2 percent next year, then 3.4 percent in 2022 and 3.5 percent in 2023.
A pandemic crisis was reflected in the first half of this year, and with a higher impact during the second quarter of the year, as a result of measures to close activities as part of precautionary measures in the face of the epidemic, in addition to the decline in global oil sales and prices.
The Corona pandemic led to partial and total curfews and the closure of domestic and international aviation since the end of March, which greatly affected the economic performance results for the second quarter of the year.
In view of the real GDP performance during the first half of 2020, it recorded a decline of about 4 percent due to the decline in real oil output at a rate of 4.9 percent, due to continuing to reduce oil production until the end of the first half in compliance with the “OPEC +” agreement.
While the real non-oil output contracted by 3.3% during the first half of the year, which showed a sharp decline for the private sector by 4.3% due to the decline in all non-oil economic activities.
With government stimulus packages and the return of economic activities in the third quarter, the Ministry of Finance expects better economic performance during the second half of this year, without ignoring the surrounding risks.
In light of these local and international developments, estimates of economic growth rates in the Kingdom for 2021 and the medium-term have been revised. Estimates indicate real GDP growth of 3.2 percent in 2021, driven by the assumption of a return to economic activities, and an improvement in the Kingdom’s trade balance with the main partners as a result of easing Embargo measures, and improvement in global supply chains, which will positively affect the local economy.
This is done in conjunction with other government initiatives in support of financial stability, and the government continues implementing medium and long-term structural reforms aimed at economic diversification and achieving financial sustainability within the framework of the Kingdom’s 2030 vision, with a focus on developing the role of the private sector and providing more investment opportunities and participation in infrastructure projects to be The main engine of economic growth, in addition to the important role played by the Public Investment Fund and other development funds in the implementation of major and development projects that support economic activities and job opportunities.
Flexibility in dealing with changes
According to the Ministry of Finance, in light of the uncertainty associated with the pandemic and its impact on the global oil markets, which directly affected the objectives and requirements of public finances, especially government spending, in addition to the impact of the precautionary measures and incentive initiatives taken by the government since the beginning of the crisis, which included exemptions and delay in paying fees. And taxes to support the private sector, the government has sought to find sources of regular and more stable revenue to counter the negative impact of the crisis on the revenue side by increasing the value-added tax rate from 5 to 15 percent starting from July of 2020, as well as the increase in customs duties for a number of Among the commodities that came into effect on June 20, 2020.
During the last period, the government worked to balance the requirements for increasing expenditures during that stage and to ensure the maintenance of financial stability and financial sustainability in light of the decline in oil prices and the revenues achieved to finance spending, through a continuous review and study of options available to achieve this balance.
The budget focused on taking the most appropriate measures for developments in the situation, the best possible options, and the least economic and social impact of other options, including the cancellation, extension, or postponement of some items of operational and capital expenditures for a number of government agencies for the fiscal year 2020, in addition to stopping some exceptional measures that were approved to serve the circumstances. Previous economics such as the cost of living allowance starting in June of 2020.
The budget was also introduced to other items to support it to face the current crisis and launch a number of initiatives such as supporting the health sector, support system programs and social benefits, such as subsidizing the salaries of private-sector employees and directly supporting workers who are not under the umbrella of any company and registered with the Public Transport Authority in passenger transport activities. Through the SANED system, 60 percent of the salaries of Saudi private-sector employees.
The government seeks to enhance the efficiency of spending and direct it to support the priority and most affected sectors, maintain the safety of citizens and residents, and pay the dues of the private sector.
Expenditure levels for 2021 reflect the fiscal policies pursued by the Kingdom to continue spending on previously planned expenditures to support the goals of the Kingdom’s Vision 2030, and to continue spending on efforts to confront the pandemic according to the requirements of the stage, while ensuring sufficient flexibility in dealing with rapid financial changes if they occur during In 2021, in addition to providing more opportunities for the private sector and funds to participate in infrastructure development projects.
Source: Asharqia Chamber