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UAE and Saudi budgets revealed: Which nation is richest in the Middle East?

UAE's budget has been announced to be slightly lower than last year's while Saudi's preliminary budget was anticipated to be cut by 7.5%. Will both country's economies rebound in 2021?

UAE’s budget for next year was set at 58 billion dirhams ($15.8 billion) The International Monetary Fund expects the UAE economy to shrink by 6.6% Riyadh expects a 12% budget deficit for 2020, falling to 5.1% next year

The cabinet of the United Arab Emirates approved a slightly smaller federal budget for 2021, amid the coronavirus crisis and lower oil prices but expenditures were still high sending a message that the country is bent on a quick recovery.

Meanwhile, a preliminary Saudi budget report shows the kingdom cutting a healthy slice off the budget though it expects its economy to normalize in 2021.

Wealth in both countries is abundant according to a recent report.

Read: Property investing and home buying interest in UAE rising

Financing the UAE near term

UAE’s budget for next year was set at 58 billion dirhams ($15.8 billion), state news agency WAM reported on Sunday, down from this year’s 61.35 bn dirhams ($16.7 bn), which was the largest budget since the establishment of the country.

“The UAE economy will be among the fastest to recover in 2021, and the government has dealt with the 2020 budget efficiently and has all the tools to continue its financial and operational efficiency in 2021,” the Dubai media office said, quoting Dubai’s ruler Sheikh Mohammed bin Rashid al-Maktoum.

The federal budget accounts for only a fraction of consolidated state spending in the UAE as individual emirates such as Abu Dhabi and Dubai also have their own budgets.  

The International Monetary Fund expects the UAE economy to shrink by 6.6% this year and to swing back to modest growth of 1.3% in 2021.

It estimated the UAE government deficit at 9.9% of GDP this year, up from 0.8% in 2019.

Read: Potential Saudi property owners get a tax break: 15% VAT not kind to economy

Financing the Saudi near term

Saudi plans to cut spending by 7.5% in next year’s budget to 990 bn riyals ($263.94 bn) but expects the economy to return to growth as its management of the coronavirus crisis improves, a preliminary budget statement showed.

The projected decrease in spending comes as the world’s largest oil exporter faces an economic contraction caused by the pandemic, a drop in oil prices, and crude production cuts.

Riyadh expects a 12% budget deficit for 2020, falling to 5.1% next year, a recently published document showed.

Spending is expected to decrease to 955 billion riyals and 941 billion riyals in 2022 and 2023, respectively, with the deficit shrinking to 3% and 0.4% in those two years. Spending this year is estimated at 1.07 trillion riyals ($272 bn).

The economy is expected to shrink by 3.8% this year, the budget document said, a more optimistic projection than the 6.8% contraction estimated by the IMF.

In 2021, the economy is expected to swing back to a 3.2% growth, partly because of the “continued improvement in containing the pandemic,” it said.

Saudi Arabia estimates total revenue to drop around 17% this year to 770 bn riyals ($208 bn) from 927 bn riyals ($250 bn) in 2019, and to bounce back to 846 billion riyals ($228.5 bn) in 2021.

UAE Richest Country in the Middle East

The UAE is home to 12 billionaires, 214 millionaires with more than $100 million wealth, 3,410 millionaires with assets above $10 mn, and 79,100 millionaires with more than $1 mn. Their total wealth is $825 bn.

Saudi has $482 bn in total wealth. 

The UAE appeared among the top five countries as an investment destination for investors from the Indian Subcontinent, Europe, and the Middle East in a survey conducted by Knight Frank.

Knight Frank’s latest Wealth Report 2020 has revealed that the UAE is home to 1,681 UHNWIs with over $30 million in wealth. the UAE is expected to see a 24% rise in UHNWIs over the next 5 years.

Recently, the New World Wealth revealed that the UAE attracts the most ‘high net worth individuals’ (HNWIs) to the country, making the country the richest in the region.

Middle East cities such as Abu Dhabi, Dubai, Cairo, and Riyadh are expected to set the benchmark as potential global hubs in the post-pandemic era.

HSBC City Reports released recently states that remote working, distance learning, telemedicine, e-commerce, and online media content are among the key areas for these cities to prioritize in the post-pandemic period.