{"id":95246,"date":"2025-03-13T00:00:00","date_gmt":"2025-03-13T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/ksa\/2025\/03\/13\/fitch-sees-budget-deficit-widening-to-3-8-of-gdp-this-year\/"},"modified":"2025-03-13T00:00:00","modified_gmt":"2025-03-13T00:00:00","slug":"fitch-sees-budget-deficit-widening-to-3-8-of-gdp-this-year","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/ksa\/2025\/03\/13\/fitch-sees-budget-deficit-widening-to-3-8-of-gdp-this-year\/","title":{"rendered":"Fitch sees budget deficit widening to 3.8% of GDP this year"},"content":{"rendered":"

Aramco\u2019s recent decision to cut dividends by 31.0% in 2025 is expected to cause the <\/strong>Kingdom\u2019s budget deficit to widen to 3.8% of GDP in 2025<\/strong>, up from 2.8% in 2024, Fitch Ratings said in a research note<\/a>. <\/p>\n

REFRESHER-<\/strong> Aramco plans to reduce<\/a> its 2025 dividend payouts to USD 85.4 bn, which it attributed to financial pressure from high payouts and subdued oil prices, which have strained its balance sheet and contributed to its net-debt position. The dividend will include a base payment and a smaller performance-linked portion.<\/p>\n

For Fitch Ratings, the change in dividend payments is no surprise:<\/strong> Aramco\u2019s plan for dividend payments is aligned with the agency\u2019s view that total dividend payments will average around USD 82 bn annually over 2025-2028, the note reads.<\/p>\n

Fitch\u2019s deficit forecast is a more conservative estimate than that of Capital Economics,<\/strong> which penciled in<\/a> a prediction of the deficit widening to 4.0% of GDP in 2025. Meanwhile, Emirates NBD said<\/a> in February that it sees Saudi Arabia recording a budget deficit of 5.6% of GDP this year.<\/p>\n

The latest gov\u2019t projections tell a different story: <\/strong>The government expects<\/a> the budget shortfall to come in at 2.3% of GDP (SAR 101 bn) in the current fiscal year, and to \u201ccontinue at similar levels over the medium term,\u201d it said in its budget for FY 2025. <\/p>\n

To meet diversification targets, some gov\u2019t adaptation will be necessary:<\/strong> \u201cWe believe the authorities retain flexibility to adjust expenditure, particularly on investment, as they look to balance capital spending priorities and fiscal targets,\u201d Fitch said. However, this could lead to lower investment spending, which could have an impact on the Kingdom\u2019s diversification efforts as investment projects are scaled back.<\/p>\n

How increased oil production will impact GDP growth:<\/strong> The agency sees oil production rising by around 10% by the end of 2026 to around 10 mn bpd, contributing to an \u201cexpansion in oil sector GDP of 2.7% in 2025 and 6.4% in 2026\u201d \u2014 and, ultimately, causing economic growth to accelerate to 3.4% in 2025 and 4.6% in 2026, from 1.3% in 2024. <\/p>\n

Fitch\u2019s prediction for GDP growth is more optimistic than most:<\/strong> S&P Global sees<\/a> Saudi Arabia\u2019s GDP growing by 2.8% in 2025, while the IMF<\/a> and the World Bank<\/a> slashed the Kingdom\u2019s 2025 growth projections to 3.2% and 3.4% respectively, citing extended Opec+ production cuts. Meanwhile, Capital Economics penciled in<\/a> an even more optimistic prediction of 3.5%, citing anticipated oil output cuts, \u201cbut activity in the non-oil sector is likely to soften on the back of a turn to fiscal consolidation.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

The forecast comes after Aramco decided to cut its dividends in 2025<\/p>\n","protected":false},"author":1,"featured_media":95247,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"newspack_ads_suppress_ads":false,"newspack_popups_has_disabled_popups":false,"newspack_sponsor_sponsorship_scope":"","newspack_sponsor_native_byline_display":"inherit","newspack_sponsor_native_category_display":"inherit","newspack_sponsor_underwriter_style":"inherit","newspack_sponsor_underwriter_placement":"inherit","ep_exclude_from_search":false,"_primary_brand":0,"newspack_featured_image_position":"","newspack_post_subtitle":"","newspack_article_summary_title":"Overview:","newspack_article_summary":"","newspack_hide_updated_date":false,"newspack_show_updated_date":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[2571],"tags":[139,27,10,307,335],"brand":[],"newspack_spnsrs_tax":[],"class_list":["post-95246","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","tag-aramco","tag-economy","tag-enterpriseam-ksa","tag-fitch-ratings","tag-gdp","wpautop","entry"],"acf":{"mongo_id":"9c9ce6ab-b0a2-4add-85a0-a556a887d55c","order":"3","is_powered_by":false,"story_type":"1","photo_url":"https:\/\/ent.news\/2024\/9\/853.jpg","photo_position":"above","homepage_title":"","full_issue_title":"Fitch sees Saudi Arabia\u2019s budget deficit widening to 3.8% of GDP this year","related_issue":[95241],"teaser":"The forecast comes after Aramco decided to cut its dividends in 2025","voice_url":"https:\/\/s3.us-east-1.amazonaws.com\/ent.news\/audio\/2025\/3\/.884ee431-c62b-4015-a1e3-14679a1ff547.mp3"},"yoast_head":"\nFitch sees budget deficit widening to 3.8% of GDP this year - 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