Saudi Arabia raised its 2013 expenditure target by almost a fifth to a record 820 billion riyals ($219 billion) as the world’s biggest oil exporter pushes ahead with expansion plans to diversify away from oil.
The government expects 2013 revenue of 829 billion riyals, giving it a surplus of 9 billion riyals, the Finance Ministry said in a statement on its website Sunday. The kingdom posted revenue of 1.24 trillion riyals in 2012 as the price of Brent crude held above $100 a barrel for a second year. Expenditure came in at 853 billion riyals, exceeding the 690 billion-riyal budget target announced a year ago, ministry data show.
King Abdullah pledged more than $500 billion on social welfare and to build projects to ensure that the country remains unscathed by the kind of political unrest that swept through other Arab countries in the past two years. He is using oil money to fight high unemployment and to build schools and hospitals. The budget has more than doubled in size since 2006.
“Budget appropriations will continue to focus on investment programs that enhance strong long-term sustainable economic growth and employment opportunities for citizens,” the Finance Ministry said. “The focus will be on education, health, social services, security services, municipal services.”
The nation’s $727 billion economy grew 6.8 percent in 2012, including expansion of 7.2 percent for non-oil industries, the Finance Ministry said. That beat the 5.6 percent median estimate of 16 analysts compiled by Bloomberg. The oil sector grew 5.5 percent, it said. Saudi Arabia, whose economy expanded 7.1 percent in 2011, derives about 90 percent of revenue from oil sales.
Next year’s budget includes 285 billion riyals of capital expenditures on investment projects, up 8 percent from last year, Finance Ministry data show.
The biggest proportion of spending will go toward education, with the allocation gaining 21 percent to 204 billion riyals, the ministry said. This includes 3.9 billion riyals to build 539 new schools in the country of about 28 million, the most-populous in the Gulf Cooperation Council.
“The budget will focus very much on social infrastructure, as well as wider physical infrastructure,” Monica Malik, Dubai-based chief economist of EFG-Hermes, said by phone. “A further focus of the government is to create job opportunities for its nationals.”
The government is spending 22 billion riyals to allow 120,000 Saudi students to pursue studies abroad under a scholarship program, the ministry said. It’s also allocating funds to build new technical colleges.
Saudi Arabia is able to finance its growing budget via oil sales, which helped the nation’s central bank boost its net foreign assets by 21 percent in the year to October to 2.35 trillion riyals. Total exports from the kingdom advanced 9 percent this year to $396 billion, about 88 percent of which was from oil, ministry data show.
The government uses conservative crude price estimates when planning its budget. This year it needed oil at around $75 a barrel to break even, according to Fahad al-Turki, senior economist at Jadwa Investment Co.
Earlier this month, Saudi Petroleum Minister Ali al-Naimi said the kingdom was content with current oil prices. Brent crude futures traded at $107 when he spoke in Doha.
After popular uprisings toppled leaders in Tunisia, Libya and Egypt in 2011 and sparked a civil war in Syria, King Abdullah promised to spend $130 billion on extra subsidies for housing and benefits. The government has allocated 100 billion riyals for the coming year on health care, including building 19 hospitals and five so-called medical cities.
The budget also sets aside 36 billion riyals for municipal services, including new roads, bridges and public transportation projects in Mecca and Riyadh, the ministry said. It increased by 16 percent to 65 billion riyals projected spending on infrastructure and transportation.
The kingdom’s public sector debt fell to 98.8 billion riyals, or 3.6 percent of projected gross domestic product, this year, from 135.5 billion riyals a year ago, the ministry said.
Saudi Arabia’s stock exchange has advanced 7.2 percent this year after declining 3.1 percent in 2011. The gauge rose the most in a week Sunday on expectations the record budget will support economic growth.
“The market will react if there is an above-expectation indication that money will keep flowing into the system,” Asim Bukhtiar, senior analyst at Riyad Capital, said by phone. “The idea is about putting more disposable income with the end consumer and giving projects to businesses.”