Saudi Arabia’s government recorded a deficit of SR2.9 billion ($770 million) in the first quarter of the year, sources familiar with the matter revealed.
The budget deficit came as spending shot up by 29% year-on-year, while oil revenues fell back by 3%.
The surge in spending sent the Saudi budget back into the red, the sources added.
Although oil revenues slipped back in the opening months of 2023, overall government revenues rose by a modest 1% in the first quarter, helped by strong receipts from value-added tax (VAT) and other levies. Total non-oil revenues rose 9% compared to the same period in 2022.
The development marks a sharp acceleration from 2022, when spending rose by 12%. Over that year as a whole, the authorities posted a budget surplus of 2.5% of gross domestic product (GDP).
The government had been expected by Moody’s Investors Service and other analysts to maintain a balanced budget in 2023 and 2024. However, the figures for Q1 have prompted one local bank to predict the government will now run a deficit for this year.
As countries and companies rush to get their hands on critical raw materials to bolster supply chains and deal with a rocky energy transition, Saudi Arabia is struggling to secure foreign direct investment.
Experts have warned that the sharp decline in foreign investments is a real disaster that proves that foreign investors do not trust the projects launched by the Saudi crown prince Mohammed bin Salman (MBS) including NEOM and The Line.
American companies are scaling back their operations in Saudi Arabia as business environment has become more hostile in the country, media reports revealed.
General Electric Co., Uber Technologies Inc. and other firms were hit by surprise tax assessments which often total tens of millions of dollars, the report said, adding, construction company Bechtel Corp. sent some contractors home while it attempted to collect on over $1 billion in unpaid bills.
Meanwhile, Bristol-Myers Squibb Co. BMY 0.51% , Gilead Sciences Inc. GILD -0.15% and other drugmakers have complained unsuccessfully for years that their intellectual property was being stolen, noted the report.
That has led to foreign investment in Saudi Arabia remaining stubbornly low with some companies scaling back their operations or delaying promised expansion plans.
Apple Inc.’s plans to open a flagship store in central Riyadh several years ago have failed. Triple Five Group, the developer of the Mall of America, decided not to proceed with its plan to build a multibillion-dollar complex.
For long, it has been difficult to do business in Saudi Arabia, with a sluggish bureaucracy, outmoded legal system and poor human-rights record.
