The government of Saudi Arabia announced a $187 billion surplus budget 2012 which clearly showed its wise leadership strong commitments to provide every possible facility to its people. Saudi Arabia being the largest economy of the Gulf Cooperation Council (GCC) and MENA (Middle East and North Africa) is also taking all possible measures to mitigate the spillover repercussions of so-called Arab Spring and ongoing global economic recession and financial crunch by announcing another balanced budget for 2012.
Socio-Economic Significance of building of hundreds of thousands of homes
Saudi finance minister Ebrahim Al Assaf explained the importance of building of hundreds of thousands of homes which would be instrumental to reduce future inflationary pressures. According to the finance ministry it had allocated 250 billion riyals from the 2012 budget surplus to fund the construction of 500,000 homes. Furthermore it would generate more employment opportunities in the country.
Robust Growth Patterns
According to the budget the GDP is going to achieve 6.8 percent in 2012 which was the country’s fastest expansion since 7.7 per cent in 2003. The finance ministry forecasted revenues at 702 billion riyals ($187 billion), while expenditures are projected at 690 billion riyals. Figures of the different sectors of the macro-economy strongly indicated that overall growth was higher than expectations because of robust development in the private sector and industrial sectors.
Immense Increase in Government’s Expenditure
The budget showed that the government sector grew 6.7 per cent during the current fiscal year while the private sector achieved 8.3 per cent. During 2011 revenues reached to 1.1 trillion riyals while expenditures totaled 804 billion riyals or 224 billion more than had initially been forecast.
The non-oil industrial sector grew an estimated 15 per cent and the construction sector 11.6 per cent. The finance ministry and Central Bank of Saudi Arabia earlier estimations about country’s GDP was 5.1 percent but actual GDP surpassed it i.e. 6.8 percent in 2011.
Outcome of Mega Social Development Projects
King Abdullah initiated a $130 billion public spending plan that largely benefited the kingdom’s lower income population. The funds were aimed at building hundreds of thousands of housing units, as well as creating jobs, raising salaries and offering unemployment benefits.
During the current fiscal year the government of Saudi Arabia introduced many meaningful social development schemes/projects/programs for the overall wellbeing of its people due to which its expenditures reached to a record 804 billion riyals (Dh787.01 billion) this year, a 39 per cent increase over its initial plan (its initial plan is to spend 690 billion riyals in 2012). In 2011 the concept of social nets was redesigned and succeeded to achieve desired dividends. Diversified but integrated socio-economic development projects maintained a sustainable social and economic infrastructure in Saudi Arabia during 2011.
Expected Socio-economic Benefits to the region/GCC
Economic works in integration and it is expected that higher economic growth of Saudi Arabia would also support trade and commerce activities in the region. Higher GDP percent of Saudi Arabia would be a boost for economic growth in the region. Saudi Arabia is the biggest Arab economy having free trade agreement (FTA) with six the Gulf Cooperation Council countries would be game-changer in the region for the public and private sectors. Mega investment projects of Saudi Arabia would provide hundreds of thousands new jobs in the region. There will be more exports from the GCC to Saudi because of higher local demand in Saudi.
Contributory Role of Government
Government being the major economic player contributed tremendously due to which inflation was kept within manageable limits. According to ministry the inflation is expected to average 4.7 per cent this year, below 5.3 per cent in 2010.
Economic Indicators Expected Growth %
Public Sector 6.7
Private Sector 8.3
Non-oil Industrial Sector 15
Source: Finance Ministry of Saudi Arabia (December 2011)
Saudi Arabia being the largest economy of the region and biggest oil exporter of the world announced a balanced budget for 2012. It assures GDP, investments and greater numbers of socio-economic projects in 2012. It also promises to generate hundreds of thousands new jobs during 2012. In regional context, the higher GDP percentage of Saudi Arabia would be catalyst for the regional economic pace and business activities. Further diversification of economy and development of SMEs would bring desired dividends in the days to come.