Saudi Budget 2022: In-Depth Analysis of Figures and Trends

The Saudi Budget 2022 was issued to form a clear roadmap for fiscal policy in the Kingdom, based on accurate government forecasts and a comprehensive analysis of regional and global economic variables. The budget primarily focused on supporting economic growth and stimulating non-oil sectors while maintaining fiscal discipline and gradually reducing reliance on oil revenues. Among the most notable features of the budget is the estimated public expenditure of approximately 955 billion Saudi Riyals, reflecting the government's desire to continue its capital expansion policies, especially in health, education, and infrastructure sectors. Estimated revenues reached about 1,045 billion Riyals, resulting in an unprecedented financial surplus of approximately 90 billion Riyals (about 2.5% of GDP). This surplus is mainly attributed to the rise in global oil prices and an increase in the Kingdom's crude oil exports following the easing of production restrictions. On the other hand, the budget paid special attention to enhancing investments in Vision 2030 projects, with significant amounts allocated to finance major projects in smart cities, tourism, and renewable energy. The budget also included expanded social support programs, including increased allocations for social security and support for low-income families, in an attempt to mitigate the effects of global inflation. In this context, the Saudi Budget 2022 demonstrated the government's commitment to a path of financial sustainability while continuing to support economic growth, which gave it strategic importance and a clear impact on the expectations of local and international financial markets.

The Saudi Budget 2022 featured a balanced distribution of government spending, reflecting national development priorities and responding to the changing needs of Saudi society. The education sector topped the financial allocations, receiving over 185 billion Riyals, highlighting the government's commitment to developing human resources and building a qualified human capital for the future. The health sector came in second with spending exceeding 138 billion Riyals, representing approximately 15% of the total budget, showcasing ongoing efforts to enhance the quality of medical services and expand health infrastructure, especially after the COVID-19 pandemic. The public services sector, including security and defense, received about 171 billion Riyals, reflecting the strategic importance of this sector in maintaining national stability and enhancing internal and external security. The budget also did not overlook infrastructure support, allocating over 100 billion Riyals for transportation, housing, and smart city development projects, in addition to substantial investments in renewable energy and water projects. Significant financial allocations were also made for social protection programs and support for citizens, such as the Citizen Account program and direct cash support initiatives, as part of the government's efforts to alleviate the effects of inflation and living costs on the most needy segments. This diverse and balanced distribution of spending confirms that the 2022 budget not only responded to economic variables but also sought to achieve broad social and developmental goals in line with Vision 2030.

Oil revenues are the backbone of the Saudi Budget 2022, accounting for more than 75% of total government revenues. This significant reliance resulted from a notable recovery in global oil prices during the year, with Brent crude exceeding $100 per barrel at times, alongside increased Saudi production following the easing of restrictions imposed by OPEC+ agreements. Oil revenues reached approximately 780 billion Riyals, exceeding initial budget estimates by about 30%, primarily due to rising global demand for energy after the repercussions of the COVID-19 pandemic subsided. Despite ongoing government efforts to diversify income sources by increasing non-oil revenues, oil revenues remained the main player in financing government spending, especially for major projects and economic stimulus programs. Nevertheless, the government has shown a clear commitment to gradually reducing reliance on oil, indicating a long-term strategy to enhance non-oil revenues through broadening the tax base, imposing fees on services, and supporting investments in non-oil sectors such as tourism, technology, and renewable energy. This cautious financial behavior highlights the Kingdom's commitment to building a more sustainable economy that is less sensitive to fluctuations in the oil market, aligning with the targets of Vision 2030. However, the data from 2022 confirms that oil will remain the primary driver of public finance in the foreseeable future.

Non-oil revenues in the Saudi Budget 2022 witnessed significant growth, reaching approximately 265 billion Riyals, or about 25% of total government revenues. This development is the result of ongoing efforts to enhance non-oil income sources as part of a long-term strategy aimed at diversifying the national revenue base. Non-oil revenue sources included taxes on goods and services (such as the value-added tax, which reached 15% since mid-2020), customs duties, zakat and income revenues, in addition to various government service fees. Government investments, particularly through the Saudi sovereign fund, also contributed to generating additional returns that supported public revenues. The importance of these revenues lies in financing a large portion of social and capital spending, reducing the budget's sensitivity to fluctuations in oil prices. In 2022, the government continued its policies to enhance tax collection efficiency, expand the scope of fees, and improve the management of government assets, which helped increase the contribution of non-oil revenues to the budget. On the other hand, this development positively reflected on investor confidence in Saudi financial markets, as the increase in sustainable revenues was seen as an indicator of macroeconomic strength. Nevertheless, challenges remain in achieving greater growth in non-oil revenues, especially with the need to balance tax reforms while maintaining the competitiveness of the economy and its attractiveness for foreign investments.

The fiscal policy outlined by the Saudi Budget 2022 had a profound impact on the macroeconomy, contributing to strong economic growth of 8.7%, the highest in the G20 for that year. This growth was bolstered by a recovery in key sectors such as manufacturing, services, and construction, thanks to substantial government spending on capital projects and infrastructure. The budget also contributed to creating new job opportunities and reducing unemployment rates among citizens, as demand for labor increased in housing, transportation, and renewable energy projects. On the other hand, social support programs alleviated the pressures of global inflation by increasing social security allocations and direct cash support for low-income families. Local consumption levels also rose, positively impacting corporate revenues and stock prices in the retail and basic materials sectors. In terms of financial sustainability, the budget demonstrated a commitment to fiscal discipline by achieving a surplus and directing part of the revenues to enhance sovereign reserves and manage public debt. This contributed to improving the Kingdom's credit rating and the confidence of international investors. At the same time, the budget stimulated foreign direct investments, especially in renewable energy and tourism sectors, supporting Vision 2030's goal of economic diversification. Thus, the 2022 budget marked a turning point in the trajectory of the Saudi economy, thanks to its balance between supporting growth, managing public finances, and expanding the base of vital economic sectors.

The announcement of the Saudi Budget 2022 resonated widely in the local financial market, as it was considered a key indicator of government economic trends and the expected liquidity in the national economy. The Saudi stock market (Tadawul) experienced a wave of optimism, particularly in sectors linked to direct government spending such as construction, housing, and services. Prices of shares in basic materials companies, led by the cement sector, rose due to expectations of increased demand for their products amid massive government projects. Investors also noted an increase in liquidity indicators, as the government financial surplus led to more money being pumped into economic activities, which contributed to enhancing trading levels and activity in the market. On the other hand, the budget sent positive signals regarding the continuity of economic reforms, boosting the confidence of both local and international investors. This was reflected in the influx of new foreign capital, especially in sectors targeted within Vision 2030. However, financial markets remained closely monitoring oil price movements, given their direct impact on the government's ability to maintain expansionary spending policies. Overall, the 2022 budget contributed to enhancing stability and confidence in the Saudi financial market, providing a solid foundation for the growth of vital sectors and supporting economic diversification strategies.

The Saudi Budget 2022 had a direct impact on the cement sector, which is one of the most closely linked sectors to government spending on infrastructure and housing projects. With the government allocating substantial amounts for road projects, smart cities, and mega-projects like NEOM and the Red Sea, domestic demand for cement increased significantly. Saudi cement companies, including Hail Cement Company, experienced growth in sales and an increase in production capacity to meet the requirements of new projects. Total profits of Saudi cement companies in the first nine months of the year reached about 2 billion Riyals, according to institutional reports, reflecting the sector's recovery thanks to intensive government spending. The sector also benefited from the government's trend to support local content and encourage national companies to expand production and export, as part of achieving the targets of Vision 2030. On the other hand, cement companies showed resilience in facing market fluctuations, benefiting from stable domestic demand despite the impact of global prices due to international economic slowdowns. Companies competed for government project contracts, focusing on improving production efficiency and reducing costs. In this context, the 2022 budget played a pivotal role in enhancing the sustainability and growth of the cement sector, which in turn contributes to achieving the Kingdom's urban and industrial development goals.

Hail Cement Company is one of the prominent companies listed on the Saudi stock market, specializing in the production and distribution of cement, playing a pivotal role in supporting infrastructure projects and urban development, especially in the northern regions of the Kingdom. The company clearly benefited from the Saudi Budget 2022, which boosted government spending on housing, roads, and smart city projects. This was reflected in the company's financial results, as it recorded growth in net profits, supported by increased domestic demand for cement products. The price of Hail Cement shares ranged between 30 and 40 Riyals during the year, with a market value of several billion Riyals, and a price-to-earnings ratio within the average range for the sector (5–15), reflecting the company's strong financial position. Hail Cement is distinguished by a regular dividend policy, which at times reached between 5% to 10% of the share price annually, making it an attractive option for investors seeking stable returns. In terms of expansions, the company invested in developing its production lines to enhance efficiency and reduce costs, in addition to seeking export opportunities in neighboring markets. The company also faced competitive challenges from other companies in the sector, but its strategic location and ability to meet the needs of government projects provided it with a significant competitive advantage. Overall, Hail Cement's performance during 2022 demonstrated the impact of government financial policies on the results of industrial companies and its close link to capital spending trends within the framework of Vision 2030.

The cement sector in Saudi Arabia is one of the most competitive sectors due to the multitude of companies and the diversity of distribution areas, with major companies such as Yamama Cement, Qassim Cement, Eastern Cement, and Najran Cement competing alongside Hail Cement for market shares. The performance of these companies largely depends on the level of government spending on infrastructure and housing projects, as every announcement of increased capital spending in the budget stimulates demand for cement and boosts company sales. In 2022, the sector benefited from a boom in government projects under Vision 2030, especially NEOM, the Red Sea project, and the expansion of major cities. Companies' profits collectively rose to about 2 billion Riyals in the first nine months, despite fluctuations in global prices and production costs. The government reinforced local content support policies, encouraging companies to develop their production capabilities and compete for supply contracts for national projects. Companies focused on innovation and improving operational efficiency to reduce costs and face price competition. Some companies also began to expand into regional markets through exports, benefiting from Saudi Arabia's geographical location. On the other hand, competition posed challenges related to price fluctuations and pressure on profit margins, but the relative stability in domestic demand due to government spending provided a solid foundation for the sector's growth and sustainability in the medium term.

The Saudi Budget 2022 and the industrial sector, in general, were affected by global economic fluctuations, particularly oil prices, inflation, and supply chains. The recovery in oil prices led to increased government revenues, enabling the state to raise spending and achieve a financial surplus; however, the ongoing uncertainty in global markets posed challenges related to liquidity management and sustainable growth. The industrial sector, including cement, faced pressures from rising energy and raw material costs due to global supply chain disruptions. Nevertheless, supportive government policies, such as energy support programs and financing facilities, helped companies navigate these challenges. Government initiatives to localize industry and invest in renewable energy also strengthened the industrial sector and reduced its dependence on imports. On the other hand, changes in global monetary policies and rising interest rates prompted some companies to restructure their financing strategies to control borrowing costs and ensure financial sustainability. These developments reflected on stock market performance, as investors closely monitored global and local economic indicators to assess the sustainability of growth. Ultimately, the 2022 budget demonstrated Saudi Arabia's ability to adapt to international changes and utilize fiscal policies to support vital economic sectors despite external challenges.

The Saudi Budget 2022 closely aligned with the targets of Vision 2030, which aims to transform the Saudi economy into a diversified and sustainable economy, reducing excessive reliance on oil. The budget allocated significant funds to support Vision 2030 projects, such as smart cities (NEOM, The Line), tourism and entertainment, renewable energy, and the development of digital infrastructure. The government focused on financing initiatives that enhance the role of the private sector and open new avenues for local and foreign investment, leading to job creation and the development of promising economic sectors. The budget also included programs to support entrepreneurship, stimulate innovation, and empower women and youth to enter the labor market, in line with economic and social changes. On the other hand, the government was keen to achieve a balance between capital spending and fiscal discipline by rationalizing expenditures and improving resource management efficiency. These policies enhanced the Kingdom's position regionally and internationally, especially with its hosting of major events such as Expo 2030 and the 2034 World Cup, which require massive investments in infrastructure and services. In this way, the 2022 budget laid the foundation for achieving the targets of Vision 2030 by supporting economic transformation and sustainable development.

The Saudi Budget 2022 establishes promising future economic prospects, reflecting the government's commitment to implementing comprehensive reforms aimed at enhancing growth and diversifying income sources. Government spending on mega-projects is expected to continue, especially with a focus on hosting global events such as Expo 2030 and the 2034 World Cup, which will increase demand in sectors such as construction, tourism, transportation, and renewable energy. The government plans to utilize financial surpluses to enhance sovereign reserves and efficiently manage public debt, providing a financial margin to address any future economic shocks. Regarding revenues, the Kingdom seeks to increase the contribution of non-oil revenues through tax reforms and expanding the base of government and private investments. The government is also expected to continue supporting the private sector and empowering it to become the main driver of economic growth through financing programs and facilities that encourage innovation and entrepreneurship. However, challenges remain, especially amid ongoing fluctuations in oil prices and global geopolitical changes, necessitating flexibility in fiscal policies and the ability to adapt quickly to changes. Overall, the 2022 budget positions the Kingdom on a path of balanced and sustainable growth, supporting the achievement of Vision 2030 targets and enhancing Saudi Arabia's status as a regional and global economic power.

The analysis of the Saudi Budget 2022 compared to previous and subsequent years serves as an important tool for understanding the evolution of fiscal policy and national economic trends. In 2021, the budget was more conservative due to the ongoing repercussions of the COVID-19 pandemic, with spending reaching about 990 billion Riyals and a financial deficit of approximately 85 billion Riyals. In contrast, 2022 saw a significant improvement with a financial surplus, driven by rising oil prices and increased production. In 2023, the government continued its expansionary spending policies, with actual spending exceeding estimates and reaching about 1,275 billion Riyals due to the implementation of additional support programs to address global inflation. Preliminary estimates for 2024 indicate that the government plans to spend 1,251 billion Riyals with expected revenues of 1,172 billion Riyals, indicating a return to a slight financial deficit (around 1.9% of GDP). These developments reflect the government's ability to adapt to economic conditions and adjust spending according to fluctuations in oil revenues and developmental needs. The comparative analysis also shows that the Kingdom's strategy is based on achieving a balance between supporting economic growth, managing public finances, and investing in strategic projects, ensuring the sustainability of the national economy in the long term.

The Saudi Budget 2022 offers valuable lessons in public finance management that can be leveraged in the coming years. First, it demonstrated the importance of flexibility in preparing and implementing fiscal policies, as the government was able to capitalize on the recovery in oil prices to achieve a financial surplus while continuing to support vital sectors. Second, the effectiveness of the income diversification strategy was highlighted, as non-oil revenues contributed significantly to financing a substantial portion of spending, reducing the budget's sensitivity to fluctuations in global markets. Third, the budget emphasized the importance of balancing capital and social spending, as it supported major development projects and social protection programs simultaneously. Fourth, the budget reflected the government's commitment to improving spending efficiency by reducing financial waste and directing resources toward higher-priority programs. Finally, the 2022 budget highlighted the value of sovereign reserves in enhancing financial stability, providing a safety margin that helped the Kingdom face any external shocks. Overall, the 2022 budget serves as a model of prudent financial management that balances support for economic growth, achieving financial sustainability, and responding to local and global changes.