Saudi Arabia’s Ambitious Vision 2030: A High-Stakes Bet on the Future
In the heart of Saudi Arabia’s northwestern desert, a massive construction site is taking shape, featuring a high-speed rail system and two towering glass skyscrapers that will eventually house 9 million people. This is The Line, a key component of Neom, a futuristic city project that aims to revolutionize living and technology in the country.
A $1.5 Trillion Gamble
Neom is the brainchild of Saudi Crown Prince Mohammed bin Salman and a central pillar of Vision 2030, a plan to diversify the Saudi economy away from oil revenues and create new jobs and industries for its young population. With an estimated cost of $1.5 trillion, Neom is just one of several mega-projects planned in the region.
A Shift in Spending Priorities
However, this year has seen a significant change in direction, with a focus on keeping investments at home and cutting costs on mega-projects like Neom. This shift comes as the Saudi deficit grows and the outlook for oil demand and global oil prices remains bleak.
Sustainability Concerns
Many experts question whether Saudi Arabia has enough money to meet its lofty goals. A Gulf-based financier notes that the kingdom has poured tens of billions into projects with no financial returns in sight. Andrew Leber, a researcher at Tulane University, believes that the current pace of spending is unsustainable and predicts that some projects will be quietly shelved to bring fiscal outlays back into balance.
Economic Challenges Ahead
Saudi Arabia has cut its growth forecasts and raised its budget deficit estimates for the next three years, expecting a period of higher spending and lower oil revenues. The kingdom’s economy has swung from a budget surplus to a deficit, and its government forecasts a deficit for the next several years as it pursues its Vision 2030 plans.
Confidence in Fiscal Discipline
Despite these challenges, Saudi Finance Minister Mohammed Al-Jadaan remains confident in the kingdom’s ability to manage its deficit, citing significant fiscal resources and a disciplined fiscal position. Saudi Arabia has an A/A-1 credit rating and high foreign currency reserves, which puts it in a comfortable position to manage its finances.
Skepticism About Megaprojects
However, many analysts and individuals working on Neom projects remain skeptical about the feasibility of these mega-projects. Reports of project cutbacks and downsizing have raised concerns about the kingdom’s ability to deliver on its ambitious plans.
A Call for Fiscal Discipline and Achievable Goals
Tarik Solomon, chairman emeritus at the American Chamber of Commerce in Saudi Arabia, notes that while transparency and project cutbacks are promising, the kingdom’s rising external borrowing reflects challenges with Vision 2030 feasibility. He stresses the need for fiscal discipline and achievable goals, rather than grandiose projects that may not deliver tangible benefits to Saudi residents.
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