Saudi Arabia is making no apologies for introducing a 50-100% Excise Tax, 5% VAT, or an 80% increase on the price of fuel and rise in electricity costs.
However it has found a SAR2bn way to say we will make it up to you.
Welfare or goodwill?
The government announced plans for the biggest budget in the kingdom’s history, with plans to spend at least $261 billion.
It never mentioned a welfare system, but it implemented one starting December 21, 2017, according to the Washington Post, with Saudi transferring $533 million in the first monthly instalment for low and middle-income families that make up approximately half of the kingdom’s population.
Minister of Labour and Social Development Ali al-Ghafees told the state-run Saudi Press Agency that bank transfers were made to approximately 3 million families, reaching around 10.6 million beneficiaries
He said half of those families received the maximum payment of 938 riyals ($250). The minimum payment is 300 riyals ($80).
Around 20 percent of those who applied for the assistance did not qualify, however.
The government said it expects to pay some$8.5bn on the Citizen’s Account payments in 2018.
Saudi expects revenues to reach $209bn, but one fifth of spending goes for the military.
According to Bloomberg, Saudi Arabia expects its economy to rebound in 2018.
The non-oil economy, the engine of job creation in the kingdom, is expected to grow “north of 3 percent”,” Finance Minister Mohammed Al-Jadaan said in an interview with Bloomberg TV in Riyadh, or double the rate in 2016.
Private sector growth is expected to rise to $78.8bn.
“An expanding economy could make it easier to advance key elements in the prince’s long-term plan in 2018, including selling a stake in state-run oil giant Aramco to help create the world’s largest sovereign wealth fund,” said Bloomberg.
The government plans to spend $293bn in 2017 with overall growth expected to rebound to 2.7% after a 0.5% recession in 2017.
Bloomberg reported that the government expects the budget deficit to narrow to about 7.3% of GDP from almost 9% this year.
“The Saudi budget marks a break with the earlier strategy of substantial deficit reduction. This is sensible and will help the economy grow somewhat faster next year,” said Ziad Daoud, Dubai-based Bloomberg economist.
“But unless oil prices keep rising, further consolidation will eventually be needed to put the public finances on a sustainable footing.”
While Brent crude prices have increased more than 10 percent this year to $63.83 per barrel, they are still significantly below their 2014 peak levels. To balance its budget, Saudi Arabia needs an oil price of $87 per barrel next year, according to Bloomberg Economics.
Last week, the government announced a $19.2bn stimulus package.
According to Bloomberg, Saudi has set a target for achieving fiscal balance in 2023 instead of 2019. It plans to spend some $22.5bn from the Public Investment Fund (PIF) and another $13.5bn from national development funds, in addition to some $261bn allocated in the budget.
It said inflation is expected to reach 5.7% up from a negative rate at the end of 2017.