As the Saudi Arabian government grapples with the enormous costs of transforming its economy from one reliant solely on oil to a diversified system, private sources indicate that the Kingdom is expected to announce a freeze on several Vision 2030 projects and reduce spending on others. These projects have been heavily promoted by Crown Prince Mohammed bin Salman.
Sources have revealed that, faced with a sense of failure, the Crown Prince has personally overseen a government committee that is nearing the completion of a comprehensive review of major projects, including the “NEOM” project.
Our information suggests that the NEOM project, which Bin Salman aims to establish on the Red Sea coast, will receive a budget that is 20% less than what was initially targeted for this year. Additionally, the committee has decided to scale back the “Qiddiya” Coast Project, a tourism and entertainment development in Jeddah on the Red Sea, which has been allocated a potential budget of $50 billion.
Analysts believe this move by the Saudi government serves to realign priorities and restore pragmatic thinking for the nation’s benefit, as it is illogical to squander a budget of $1.5 trillion on projects in the desert that experts consider unrealistic.
They attribute this decision to prioritize spending to the decline in oil prices, the failure of foreign investments to meet their goals, and a continued budget deficit over the past three years.
Jean-Michel Saliba, an economist for the Middle East and North Africa at Bank of America, commented that such spending would create frenzied economic activity, which is undesirable due to the risk it poses to the profitability of the projects if the Kingdom proceeds without financial constraints.
It is worth noting that last December, the Saudi government announced it would re-evaluate Vision 2030 projects based on financing strength and each project’s objectives. The government stated it would either postpone or accelerate some projects depending on its ability to finance commitments without affecting its credit rating.
Farouk Soussa, an economist at Goldman Sachs for the Middle East and North Africa, viewed the government’s review of Vision 2030 projects as a sign of maturity. This approach prevents limitless spending and avoids undue reliance on any single initiative, demonstrating a level of rationality.
