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Saudi Arabia's quarterly budget deficit balloons to $33.5 Billion, driven by spending boom

Saudi Arabia has reported a first quarter 'fiscal deficit' of 125.7 billion Riyals ($33.5 billion), which is not far off from its projected full-year figure of $44 billion. It also increased?spending in order to support the economy amid disruptions caused by the Iran War.

In response to U.S. and Israeli strikes which began on 28 February, Iran has attacked Gulf states. This has damaged major energy infrastructure and disrupted shipping in the Strait of Hormuz. The Strait of Hormuz normally handles about 20% of all global oil and LNG?flows.

Saudi Arabia's economic growth will slow down sharply in this year, despite higher oil prices. This is also expected to be the case for non-oil industries such as tourism.

The Finance Ministry reported that total government expenditures reached 386.7 billion Riyals in the first quarter of this year, an increase of 20% compared to the same period last year. This was more than the revenues, which were 261.0 billion Riyals.

* "Despite a?marked increase in the deficit in 1Q, we still expect a?smaller deficit in 2026 for the full year than in 2025," Monica Malik said, chief economist of Abu Dhabi Commercial Bank. The sharp rise in oil prices since March will offset the loss of output.

* Oil revenues fell 3%, to 144.7 billion Riyals from 149.8 in Q1 2025.

* Non-oil revenue rose by?2% from 113.8 billion to 116.3 billion Riyals a year ago.

* Military expenditures increased by 26%, to 64.7 billion Riyals, compared with 51.4 billion Riyals in Q1 of 2025.

The International Monetary Fund reported that the GDP growth rate was 2.8% in the first quarter of this year, down from 3.7% last year. However, the impact on the economy is expected to be'short-lived' and 'limited, according to the IMF.

* The kingdom is following its Vision 2030 economic plan, which requires hundreds of billions in government investment to reduce the dependence on hydrocarbon revenue.

Saudi Arabia's budget deficit in 2025 was 276 billion riyals, higher than the 245 billion riyals forecast.

(source: Reuters)