#SaudiBudget2017 announced: Latest updates
How reforms will transform the economy to coincide with the Kingdom's Vision2020
Saudi Arabia’s 2017 state budget today, is set to chart a course for the future that puts economic reforms on the agenda, coinciding with the country’s Vision 2030.
The Saudi Ministry of Finance has considered two scenarios for the Saudi economy over the next four years.
The first scenario is based on the success of the approved reforms in the new budget, which extends to subsequent budgets until 2020. The other scenario is less optimistic, showing a different outcome of the economy in case the reforms do not go through. Reforms are necessary in light of the new developments in the economic landscape and the state of energy market worldwide.
How does the Saudi economy look until 2020 based on these scenarios?
According to forecasts made by the Ministry of Finance, Saudi Arabia’s GDP is expected to grow by 2 percent in 2017, as a result of the implementation of the decisions and policies of reforms within the declared financial plan. The latter is considered the first of its kind in terms of transparency in the country’s history. Without these reforms, the ministry estimates, that the growth will only reach 1.2 percent, noting that the economy grew by 1.3 percent in 2016.
In 2018, the GDP is expected to reach 2.1 percent and if the reforms don’t get implemented, the growth will only be 0.9 percent.
In 2019, the Saudi economy is expected to grow by 2.3 percent under the reforms program, compared to a mere 2 percent without it.
Finally, the projection hits the peak in 2020, achieving a potential 3.5 percent GDP growth. Without the reforms, the growth falls to 1.8 percent, which is about half the rate estimated attainable in light of the economic reforms.
The non-oil sector
With the country pursuing its Vision 2030 program and the Saudi National Transformation Program to raise the contribution of the non-oil sector in the Saudi economy, the Ministry of Finance also put in place a scenario for the development of the local manufacturing sector in the Kingdom.
According to outlooks based on the economic reform program, the Gross Domestic Product (GDP) of the non-oil sector is expected to grow to 2.5 percent in 2017, compared to only 1.6 percent without the reforms.
In 2018, the projected growth is 2.3 percent in the non-oil sector output, compared with 1.2 percent growth if the economic plans stay the course. In 2019, expectations point to a leap in the growth of non-oil sector output in Saudi Arabia amounting to 4 percent as opposed to a mere 2.4 percent without the reforms.
By the end of 2020, the output of the non-oil sector will record a growth of 4.4 percent in light of the economic program, but it will not exceed 2.5 percent if the reforms are not implemented, according to the Saudi Ministry of Finance.
Following are the highlights of the Saudi Budget 2017:
• Lays down a financial strategy on the basis of foresight over the next five years
• Intends to make the process fully transparent and allows citizens easy and guaranteed access to information and data related to the budget
• Launching a fiscal balance program that should be reached by the year 2020
• The program includes enhancing government participation in various ways
• Specifying financial strategy based on two scenarios – a pessimistic one that expects attaining balance between expenditure and revenue in 2020 and an optimistic one that expects to attain fiscal balance in 2019
• Imposing a 5 percent Value Added Tax (VAT) from 2018, without any change in the prices
• The program includes SAR 100 monthly fee on every individual being sponsored by an expatriate worked
• The revenue to be generated from this tax is estimated to reach 1 billion riyals 2018
• Monthly feeof SAR 400 on every employee in a company whose number of foreign employees exceed the number of Saudis
• SAR 300 fee on every employee in a company whose number of foreign employees is less than the number of Saudis and SAR 200 riyals on every person they sponsor
• Monthly fee of SAR 600 on every employee in a company whose number of foreign employees exceed the number of Saudis
• SAR 500 fee on every employee in a company whose number of foreign employees is less than the number of Saudis and SAR 300 on every person he sponsors
• The revenue generated from these fees is estimated at SAR 44 billion riyals by 2020
• Monthly fee of SAR 800 on every employee in a company whose number of foreign employees exceed the number of Saudis
• SAR 700 fee on every employee in a company whose number of foreign employees is less than the number of Saudis and SAR 400 on every person he sponsors
• The revenue from this fee is estimated at SAR 24 billion by 2019
• Continue the process of lifting subsidies on sugar and beverages and continuing new visa fees and white lands fees
• Devise a gradual program over the course of five years to increase the prices of essential materials
• The government will allocate a program to support lending in the private sector
• A duration of 60 days will be fixed for the payment of all financial commitments to companies and contractors
• Saudi citizens will be supported by financial installments monthly through the unified account
• Saudi energy minister: Program to support Saudi citizens against price increase through a citizen unified account
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