Saudi Arabia announced on Tuesday that it will spend 978 billion riyals ($261 billion) in 2018, its largest-ever budget. Effective spending will be the real test of success, analysts said, as the government looks to diversify its economy away from oil.
This expansionary budget comes at a time of economic struggle — the country entered into recession this year, contracting 0.5 percent — but the government is optimistic, estimating growth to rebound to 2.7 percent in 2018.
Redesigning the economy is a crucial component of Vision 2030, a wide-ranging plan to make Saudi Arabia less dependent on oil, reduce subsidies and increase employment. The jobless rate among Saudi citizens stands around 12.8 percent.
According to analysts, a key feature of the budget was the explicit focus on structural reforms accompanying the increased spending.
“The key is to look at what they’re spending the money on and how effectively they spend it,” Khatija Haque, head of Middle East and North Africa research at U.A.E-based bank Emirates NBD, told CNBC on Wednesday.
The government intends to cut energy subsidies next year, with the move widely expected to free up funds for other parts of the economy such as infrastructure.