RIYADH: Saudi Arabia on Wednesday announced it was projecting a budget deficit of 2 percent of GDP in 2023 and 1.9 percent of GDP next year, reflecting rising spending and lower oil revenue.

The announcement comes one year after the Gulf kingdom, the world’s biggest crude exporter and the Middle East’s largest economy, recorded its first budget surplus in nearly a decade in the wake of Russia’s invasion of Ukraine which led to a boom in oil prices.

Saudi Arabia is in the middle of a sweeping economic and social reform agenda known as Vision 2030, intended to transform the formerly closed-off kingdom into a business, tourism and sports hub.

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The deficit for 2023 is expected to amount to 82 billion Saudi riyals (roughly $21.8 billion), while in 2024 it is expected to total 79 billion Saudi riyals (roughly $21 billion), according to figures released by the finance ministry.

Riyadh anticipates 4.4 percent real GDP growth in 2024 after just 0.03 percent this year, the ministry said.

The projections broadly align with a pre-budget statement issued in October that indicated deficits would last through 2026.

In a briefing with reporters, Finance Minister Mohammed al-Jadaan said Saudi Arabia’s annual budgets stem from “very conservative” estimates of oil revenue, meaning deficits are the product not of fluctuating oil prices but of a deliberate decision to boost spending.

“We actually intentionally decided to spend more and cause the deficit knowingly, consciously” on the belief that deficits of up to 3 percent are “absolutely fine… if you spend that money right”, Jadaan said.

He trumpeted projected non-oil GDP growth of around 6 percent in 2023 and 2024 as evidence the plan is working.

Jadaan also said that 2024 spending could exceed projections announced on Wednesday, though only “in the range of 4 or 5 percent”.