Saudi government muddles ahead with austerity-lite masquerading as largesse

Published in GSN, 13 January 2017

Mohammed Al-Jaadan’s first budget as finance minister provided an interesting exercise in expectation management and spin. The government tried to present the budget as an expansionary one, allowing the kingdom to catch its breath after several years of tough austerity which have strained the social contract between the Al-Saud and their citizenry. However, analysis of the detail suggests the reality is rather different.

The figures in the official statement, published on 22 December, said spending would rise by 8% this year to SR890bn. But this is only true if one ignores some SR105bn that was spent in 2016 that hadn’t been included in that year’s budget. (This comprised mostly delayed payments to contractors.) Taking such details into account, this year’s spending plans represent a 4% cut compared to 2016 and more austerity is likely to lead to another year of underwhelming economic performance.

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