Strategy Note /
Saudi Arabia

SNB Capital Strategy - Continuation of sustainability and economic reforms

  • The 2023f budget continues to focus on fiscal sustainability and progress on key economic and structural reforms

  • In 2023f, revenues are expected to decrease by 8.4% yoy to SAR1,130bn, marginally higher than the pre-budget levels.

  • Total expenditures are projected at SAR1,114bn (in-line with the pre-budget figures)

Iyad Khalid Ghulam
Iyad Khalid Ghulam

Head of Equity Research

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SNB Capital
11 December 2022
Published bySNB Capital

The Saudi budget is projected to report another surplus of SAR16bn in 2023f. Revenues are projected to decline by 8.4% yoy to SAR1,130bn, while expenditures are projected to decline by 1.6% yoy to SAR1,114bn in 2023f. Real GDP is projected to grow by 3.1% in 2023f to exceed US$1trn for the first time, driven by strong growth non-oil GDP. Debt level is expected to remain broadly stable, translating into a debt-to-GDP of 24.6% in 2023f (vs 24.9% in 2022e). Spending efficiency, fiscal sustainability and the implementation of various strategies and programs to achieve sustainable economic growth are the key goals of the government in the medium term.

  • The 2023f budget continues to focus on fiscal sustainability and progress on key economic and structural reforms with an aim to solidify the fiscal position of Saudi and provide economic flexibility. Supporting the private sector is a key goal, to be achieved through various economic enablers including the effective development contribution of PIF and NDF. Moreover, the government strategies and programs such as the National Investment Strategy, NIDLP and the National Strategy for Industry are expected to support the growth of the private sector.

  • In 2023f, revenues are expected to decrease by 8.4% yoy to SAR1,130bn, marginally higher than the pre-budget levels of SAR1,123bn. The yoy decline is driven by 12.1% yoy decrease in other revenues (includes oil revenue) to SAR808bn which will be partially offset by 2.3% yoy increase in tax revenues to SAR322bn. According to our estimates, the implicit oil price is cUS$68-US$77 (assuming oil production of c9.8 mmbpd).

  • Total expenditures are projected at SAR1,114bn (in-line with the pre-budget figures), down 1.6% yoy. The current expenditure is expected to decline by 2.4% yoy to SAR957bn while Capex are expected to grow by 3.5% yoy to SAR157bn.

  • Real GDP is projected to grow at 3.1% in 2023f vs 8.5% in 2022e with GDP exceeding US$1.0trn for the first time on record.

  • Subsequently, a budget surplus of SAR16bn (0.4% of GDP) is expected in 2023f, higher than the pre-budget estimates of SAR9.0bn. The surplus is expected to be mainly directed towards reserves and supporting development funds (NDF and PIF). Despite the foreseen surplus, the government will continue to tap the debt markets with an aim to repay due principal and financing strategic projects. Debt-to-GDP is expected to marginally decline to 24.6% in 2023f (vs the ceiling of 40%).