2021 Budget Announced

HM King Salman has approved the Saudi Government’s budget for 2021 and has provided a summary of spending in 2020. All countries around the world have faced an extraordinary, budget-busting year due to the Covid pandemic and of course the Kingdom is no exception but Saudi has also faced extreme volatility in the oil market this year.



  • Spending in 2020 is expected to reach $285bn, higher than the forecast budget of $272bn.
  • Budget deficit in 2020 is expected to widen to $79bn, higher than the forecast deficit of $49bn.
  • The 2020 deficit will represent 12% of GDP, up from the forecast 6.4%.
  • The Saudi economy is expected to contract by 3.7% in 2020 according the Ministry of Finance, the IMF forecast a contraction of 5.7%.


  • Forecast budget is $264bn
  • Forecast deficit is $37bn, representing 4.9% of GDP
  • Economic growth of 3.2% expected in 2021


As ever the numbers only really tell us half the story and we have to be mindful about selective use of figures. Of course 2020 has been difficult but despite the challenges of the pandemic and an oil price crash, we did not see a widespread repeat of behaviours from 2015-16 when delay and non-payment were commonplace.

There has also been a significant increase in non-oil revenues in 2020, accounting for 57% of Government revenues in Q3 2020 but this is largely due to the depressed oil price and also the increase in VAT and other revenue raising measures. Although we can debate the numbers, the direction of travel is clear and the diversification strategy is working.

The oil price of course remains pivotal and it appears that the Saudis are predicating their 2021 budget on a Brent price of around $40 a barrel with the shortfall in revenues being made up from non-oil sources, taxes, reserves and borrowing.

As expected there will be a reduction in spending in 2021 and the Ministry of Finance have confirmed their intention to reduce spending through to 2023 when they forecast that the budget will be balanced with the deficit largely eliminated.

So, where will the cuts be in 2021? Well, we do not expect there to be a slow-down with regard to the key projects and initiatives that underpin Vision 2030. There may be some scaling back or efficiencies through re-structuring but we can expect ‘full steam ahead’ for critical projects that will contribute to quality of life improvements and have a positive impact on revenues (Qiddiya being a great example of this).

Defence will see a decrease in spending in 2021. This will come in part from a reduction in the tempo of operations in Yemen but also as a result of the on-going transformation that seeks, inter alia, to ensure better value for money particularly from the procurement budgets.

Transformation will also empower the private sector and reduce the burden on Government when it comes to both investment and revenue generation. We do expect to see changes to company set-up regulations and movement on the long heralded roll out of special economic zones in the Kingdom.

Despite the significant and obvious challenges, the Ministry of Investment is focused on creating an investor friendly environment, for both domestic and international investors.

The Public Investment Fund (PIF) will also continue to play a major role in the implementation of Vision 2030 and we can expect further acquisitions both domestically and overseas from the PIF. Within the Kingdom, it is likely that there will be some consolidation of PIF entities, particularly in the defence and aerospace sector.

We can also expect the privatisation programme to regain momentum with water and agricultural bodies likely to mature their privatisation plans in 2021. This will also provide an insight into how and when the PIF entities might move to part-privatisation in the future.

So, overall, the Saudi Government appear to be taking a prudent approach to spending for the next few years. Clear priorities are those projects and initiatives that move Vision 2030 forward and although there will be some cutbacks, the Kingdom will be one of the few opportunity rich markets for 2021 and beyond.





The Arab News

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