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Saudi Arabia’s finance minister said the kingdom would “take stock” of its spending priorities as it grappled with a sharp drop in oil revenue and the global tumult triggered by US President Donald Trump’s tariffs.
Mohammed al-Jadaan told the Financial Times that Riyadh planned to maintain its current pace of government spending despite widening budget and current account deficits, and rising debt.
But he said Saudi Arabia would use the period of lower oil prices, as well as the uncertain global outlook, to evaluate how it managed the vast array of development projects under Crown Prince Mohammed bin Salman’s $1tn plans to diversify the economy and boost non-oil growth.
“We’re not going to waste the crisis. People think that what’s happening in the world is a crisis, but our economy is doing very well,” Jadaan said. “It’s a chance to look at things — if there’s an opportunity to do something bold, do it.”
A “crisis provides us an opportunity to take stock and consider”, he said. “Are we rushing [projects]? Are there unintended consequences? Should we delay? Should we reschedule? Should we accelerate?”
Jadaan said the prime focus was to avoid falling into the “trap of booms and busts” that had long plagued the oil-dependent kingdom. “We are very aware of how important it is that we don’t go procyclical, but countercyclical,” he said. “Instead of working to just balance the books, by design we are making sure that we spend in support of the growth.”
Even before the slump in oil prices this year — Brent crude is trading at about $64 a barrel, after averaging $82 last year — Riyadh was recalibrating its spending after almost a decade of frenzied activity as it attempted to manage its massive financial commitments and prevent the economy overheating.
The Public Investment Fund, which is responsible for the development of the country’s megaprojects, is also going through a “similar, very prudent exercise of making sure that they also recalibrate”, said Jadaan, who sits on the $940bn sovereign wealth fund’s board.
The FT reported last month that the new chief executive of Neom, the PIF’s flagship $500bn development, was conducting a comprehensive review of the scope and priority of its futuristic projects.
The government budgeted a slight decrease in its expenditure this year compared with last. Sectors being prioritised include tourism, manufacturing, logistics, renewable energy and technology, with the state’s petrodollar-fuelled spending the key driver of economic activity.
Riyadh has been enduring the twin hit of falling oil prices and reduced exports, pumping at its lowest levels since 2011 after voluntarily cutting crude production as the de facto leader of Opec+. The cartel is starting to unwind those cuts and gradually raise output, but that risks putting more pressure on prices.
An 18 per cent drop in oil revenue in the first quarter of this year, compared with the same period in 2024, underlined the challenges the kingdom faces. The fiscal deficit swelled to $15.6bn in that period, the highest quarterly deficit since 2021.
That suggested the finance ministry would miss its target of narrowing the budget deficit to 2.3 per cent of GDP this year.
The IMF forecasts the budget deficit will widen above 4 per cent of GDP this year and next, estimating Riyadh’s break-even oil price — the level it needs to balance its books — to be $92 a barrel.
Jadaan said he would not be worried about the deficit widening to 3 per cent, 4 per cent, or “occasionally” 5 per cent of GDP as long as government spending supported non-oil growth — a key metric of its diversification plans.
Jadaan said other factors that would cause the government to slow down would be to protect its foreign reserves and ensure the cost of debt remained “reasonable”.
The kingdom, already one of the biggest emerging market issuers of debt this year, will have to borrow more to fund the gap.
Its debt-to-GDP ratio is relatively low at 26 per cent, and Jadaan said he did not see “any reasonable scenario” that “would make us even come close to” the ministry’s ceiling of 40 per cent.
“There will possibly be more deficit than we anticipated in the budget, but not significant,” Jadaan said. “We still have plenty of room in our fiscal buffers, ample foreign reserves [and] significant government reserves.”
He still expects GDP growth to meet the forecast of 4.6 per cent for the year, driven by non-oil activities, up from 1.3 per cent in 2024. The IMF, however, forecasts 3 per cent growth, a slight downward revision from an earlier estimate.
But Jadaan said what made the government feel “comfortable” was the fact that “a lot of the targets have been reached or on track to be achieved”.
“That gives us a lot of confidence,” he said. “But we aren’t complacent.”
