Saudi Arabia signals spending restraint as oil prices pressure state revenue
(Bloomberg) – Saudi Arabian officials sharpened their messaging on the government’s fiscal shift at the World Economic Forum in Davos, saying the kingdom is focused now more than ever before on “wiser” spending as it works to fine tune its strategy after years of going “full throttle.”
“Agility keeps progress on the rails,” Saudi Minister of Economy and Planning Faisal Al-Ibrahim said in an interview with Bloomberg Television on the sidelines of the event.
Saudi Arabia is undertaking a delicate balancing act when it comes to the economy as it seeks to drive spending and progress on Crown Prince Mohammed bin Salman’s $2 trillion Vision 2030 strategy, while managing lower oil revenues stemming from subdued crude prices.
The government has made clear in recent months the Saudis are now working to spend more efficiently and will not hesitate to walk away from costly projects that perhaps no longer make sense or don’t fit squarely with the kingdom’s priorities.
Both Al-Ibrahim and Finance Minister Mohammed Al-Jadaan took that message further in Switzerland, saying the Saudis are homing in on “optimal impact at the right cost” as they move into phase three of the diverisfication agenda.
Saudi Arabia is “learning from the mistakes, rewriting things that need to be rewritten,” Jadaan said. “Adjust and move on.”
The government has also been more vocal about its ambitions to attract more private investment as it looks to ease the financial burden of driving progress on the crown prince’s plans.
Saudi Arabia has been running budget deficits since 2022 but sees its fiscal shortfall easing to 3.3% this year from 5.3% in 2025. Wall Street economists estimate the figure will be far higher and see the state borrowing a record $25 billion in international debt markets this year to plug the gap.
Saudi Arabia’s own estimates are for government borrowing to ease to $14 billion to $17 billion in 2026, though the government has a tendency to overshoot on its economic targets.
Al-Ibrahim said both debt issuance and the sustained budget deficit ensure there is specific financing going to areas that create value and generate returns for the Saudi economy. More private market activity is expected in 2026.
Economic growth is forecast to remain a bright spot for the kingdom, helped by a robust non-oil economy. The International Monetary Fund this week raised its growth forecast for Saudi Arabia’s gross domestic product in 2026, to 4.5% from 4%. The economy expanded 5% in the third quarter, the fastest since 2023.
