Saudi Arabia's Q1 2025 budget: Managing deficits, driving growth
Saudi Arabia's first-quarter 2025 budget results highlight the ongoing challenge of balancing economic growth with social responsibility.
The quarter ended with a $15.6 billion budget deficit, as revenues totaled $70.3 billion and expenditures reached $85.9 billion.
The deficit resulted from a 10 percent decline in total revenues, mainly due to an 18 percent drop in oil revenues, which fell to $39.9 billion as Saudi Arabia maintained production cuts in line with OPEC+ policies.
Despite the shortfall, the government remains committed to economic and financial reforms under Vision 2030, aiming to strengthen long-term fiscal sustainability and accelerate diversification beyond oil.
Non-oil revenues rose by 2 percent, reflecting ongoing efforts to broaden revenue sources. This growth was driven by strong first-quarter economic indicators, particularly a 12.3 percent annual surge in consumer spending.
Contributing factors included a 46.3 percent jump in e-commerce, a 25.7 percent rise in SADAD payments, and an 8 percent increase in point-of-sale transactions. These trends indicate robust consumer confidence and sustained momentum in domestic demand and financial activity.
Additionally, the Purchasing Managers' Index — a key indicator of non-oil private sector performance — averaged 59 points in the first quarter of 2025, maintaining a four-year streak above the 50-point threshold.
Notably, the index climbed to 60.5 points in January 2025, its highest level since 2014. This surge highlights strong business confidence and reflects optimistic growth expectations at the start of the year, reinforcing the resilience and momentum of Saudi Arabia's economic expansion.
On the labor market front, the overall unemployment rate declined to 3.5 percent by the fourth quarter of 2024, down from 3.7 percent in the previous quarter.
Unemployment among Saudis also dropped to a historic low, reaching the Vision 2030 target of 7 percent in the fourth quarter — down from 7.8 percent — marking a 0.8 percentage point decline.
The government is also working to enhance the efficiency of the social support system and foster a more dynamic investment environment in pursuit of Vision 2030 targets.
Spending on social benefits surged by 28 percent, exceeding $8 billion in the first quarter of 2025, compared to $6.4 billion in the same period of 2024. This increase underscores the government's commitment to prioritizing citizen welfare by enhancing healthcare, education, and social support programs aimed at improving quality of life.
It is important to note that the first-quarter 2025 budget deficit was anticipated and strategically planned, reflecting the government's proactive approach to economic restructuring.
The Kingdom's ongoing financial and structural reforms have achieved key objectives, strengthened economic resilience, and established a solid foundation for sustainable growth and diversification. This is particularly evident in the continued expansion of non-oil activities, which remain robust despite global economic challenges.
These reforms have also helped offset the impact of declining oil activity by fostering income diversification, promoting a dynamic business environment that empowers the private sector, and providing targeted support to high-potential industries — all contributing to sustained economic growth and stability.
This progress affirms the Kingdom's commitment to fiscal sustainability and long-term economic growth, guided by strategic fiscal planning and supported by available fiscal space.
Furthermore, the government remains committed to implementing transformational initiatives and strategic projects that drive comprehensive development across all sectors of the Kingdom.
The government also aims to diversify the economic base, support sustained economic growth, advance infrastructure development, and improve public services to enhance quality of life.
In conclusion, the Saudi government's continued success in boosting non-oil revenues through economic diversification has been crucial in enhancing the business environment, attracting both local and foreign investments, and strengthening the Kingdom's trade balance.
Moreover, Saudi Arabia remains dedicated to implementing impactful programs and projects that deliver economic, social, and environmental benefits, aligning with the three core pillars of Vision 2030 — an ambitious nation, a thriving economy, and a vibrant society.
The government's prudent fiscal policy has been instrumental in maintaining financial stability, ensuring a strong fiscal position, and sustaining healthy government reserves, which now exceed $104.8 billion.
• Talat Zaki Hafiz is an economist and financial analyst. X: @TalatHafiz
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