Dancing with Deficits: Saudi Arabia’s BRICS Balancing Act
After joining the BRICS alliance, Saudi Arabia faces a projected budget deficit of approximately $21 billion as it endeavors to diversify its economy.
Nonetheless, the nation anticipates a GDP growth rate exceeding 4%, primarily driven by the expansion of its non-oil sectors.
Saudi Arabia has been increasingly focused on growing its economy beyond its substantial oil production. The country’s upcoming budget forecast acknowledges the potential for an increased deficit, especially in light of the volatile oil market conditions expected for the remainder of the year.
The BRICS economic alliance garnered significant attention recently when it expanded to include six new member countries: Saudi Arabia, Iran, the United Arab Emirates (UAE), Egypt, Argentina, and Ethiopia, alongside the existing members Brazil, Russia, India, China, and South Africa.
Among these new additions, Saudi Arabia, as a fresh member of BRICS, is likely to face short-term challenges in balancing its economic outlook. Specifically, it is projected to encounter a budget deficit of $21 billion in the upcoming year despite its efforts to shift away from dependence on the oil industry.
According to Bloomberg reports, prior forecasts had consistently indicated surpluses until 2025, but afterward, the country is expected to grapple with a budget deficit until at least 2026.
The forecasts suggest that the $1.1 trillion Saudi economy will narrowly avoid contraction this year, primarily due to uncertainties in the oil market and ongoing diversification efforts.
Saudi Arabia holds significant potential for the growth of the BRICS alliance, given its substantial oil production and overall economic strength, which were key drivers behind the bloc’s expansion.
Nevertheless, the short-term challenges in its budgetary outlook may raise concerns. However, in the long run, the benefits of diversification are expected to contribute positively to the alliance’s growth in the coming years.