Saudi Arabia’s general budget for 2020, announced last week, is progressive and focuses on balancing fiscal stability and economic growth despite oil market volatility, according KPMG Al Fozan & Partners.
The provider of audit, tax and advisory services in Saudi Arabia said the latest budget continues to support the kingdom’s diversification efforts, transitioning the economy away from its dependency on the oil sector by developing the private sector.
Budgeted revenue is expected to reach SR833 billion in 2020, 62 percent of which is driven mainly by oil revenue, while budgeted expenditure is projected at SR1,020 billion.
Fiscal deficit stands at SR187 billion (6.4 percent of estimated 2020 GDP) compared to SR131 billion in 2019. Public debt is anticipated at SR754 billion, 26 percent of the estimated GDP in 2020, growing 11.2 percent compared to the previous year.
Dr Abdullah Hamad Al Fozan, chairman of KPMG in Saudi Arabia, said: “The proposed budget focuses on maintaining fiscal stability and sustainability, improving the diversification of revenue sources, and taking measures to advance the economic and social development of the country.
“Despite the oil market volatility, which had some impact on the expenditure, the government has made notable progress on the Vision Realization Programs. In addition, the allocation of over SR1 trillion budget expenditure for 2020 demonstrates the government’s commitment towards driving economic growth.”
Dr Hussain Abusaaq, chief economist and head of research at KPMG Saudi Arabia, said: “The forecasted general budget figures of higher expenditures over expected revenues, illustrates the government’s efforts of diversifying the economy through continuous implementation of Vision 2030 programs. The key focus of the 2020 budget is to maintain the balance between growth and fiscal sustainability while increasing spending efficiency.”
Oil is expected to remain a major contributor to the kingdom’s revenue, although it is expected to decline by 14.8 percent to SR513 billion in 2020 from SR602 billion in 2019, primarily due to volatility in oil prices owing to trade war, according to the KPMG note.
It added that non-oil revenue is expected to touch a new high of SR320 billion in 2020, an increase of 1.6 percent on 2019.
At SR200 billion in 2020, tax revenues are projected to be 1.2 percent lower than last year’s value of SR203 billion. Taxes on goods and services provides the largest share of non-oil revenue at 44.4 percent.
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