LONDON: Britain slashed its growth forecasts for its Brexit-bound economy and expects to borrow a lot more going into the next decade, the country's finance minister said on Wednesday as he delivered a gloomy budget statement in Parliament.
Slower economic growth will mean lower tax revenues for Philip Hammond to spend on the kind of bold moves that many in his Conservative Party — still smarting from an election mauling in June — had demanded.
But Hammond sought to show he could help voters by abolishing a duty for first-time buyers on the purchases of homes worth up to £300,000 ($397,500), keeping a freeze on fuel duty and spending more on the health service.
He also committed £44 billion to provide funding, loans and guarantees over five years in an effort to deliver 300,000 net additional homes per year on average by the mid-2020s, addressing Britain’s acute housing shortage.
Hammond said he had to keep his focus on fixing Britain’s public finances as he steers an economy growing only weakly — even when the global economy is picking up — through a challenging period as it prepares to leave the EU.
“We took over an economy with the highest budget deficit in our peacetime history,” he told Parliament.
“Since then, thanks to the hard work of the British people, that deficit has been shrinking and next year will be below 2 percent. But our debt is still too high,” he said.
But Britain’s official budget watchdog said the spending plans for the next two years were a “significant giveaway” as Hammond sought to cushion the Brexit slowdown.
At a time when inflation has risen sharply and wages have grown only slowly, many voters are increasingly angry about years of spending cuts in many areas of public services, something Hammond acknowledged in his speech.
“We understand the frustration of families where real incomes are under pressure,” he said.
He said that employment was expected to rise, that he would reduce the delays in receiving benefit payments that many families have suffered under changes to the welfare system.
Hammond also sought to help British businesses by slowing the pace of increase in the so-called business rates tax on the premises they occupy, and he raised a tax credit for research and development.
But the limitations on Hammond were clear as he said the war chest he wants to keep in reserve to help the economy had almost halved in size.
He said his so-called “fiscal headroom” — taking into consideration his budget targets — now stood at £14.8 billion, down from the £26 billion expected in March.
Britain’s budget forecasters now expect gross domestic product will grow by 1.5 percent in 2017, compared with a forecast of 2.0 percent made in March, reflecting a slowdown this year as the Brexit vote weighed.
The Office for Budget Responsibility saw growth in 2018 at 1.4 percent, down from its previous forecast of 1.6 percent, Hammond told Parliament.
Its revisions for later years were more acute: GDP growth forecasts in 2019 and 2020 stood at 1.3 percent in both years compared with 1.7 and 1.9 percent respectively seen in March.
“There is a recognition from the OBR that the growth outlook is dire at a time when the world economy is enjoying a synchronized upswing. Germany is enjoying a boom and even Italy is growing faster than the UK,” said Daiwa Capital Markets Europe’s Chris Scicluna.
The OBR had been expected to take a gloomier view after it said in October that it would lower its projections for productivity growth in the years ahead.
By 2021 and 2022, growth was seen picking up only slightly to 1.5 and 1.6 percent respectively.
Many lawmakers had called on Hammond to produce a bold budget to turn around the fortunes of Prime Minister Theresa May who lost her parliamentary majority in a failed election gamble in June, is struggling to make headway in Brexit negotiations with the EU and recently lost two ministers from her Cabinet.
Lower tax revenues and slower growth will add to the challenge of turning Britain’s budget deficit into a surplus by the mid-2020s.
Hammond said the OBR now expected Britain to borrow less this year and in the 2018/19 fiscal year but more in the following years as the slowdown in the economy bites.
Britain is expected to run a budget deficit of 1.3 percent of GDP by the 2021/22 financial year, almost double the previous estimate of 0.7 percent.
Before last year’s Brexit vote, Britain had been aiming to post a budget surplus by the end of this decade, itself a delay from an original target of fixing the public finances by 2015.
There was some better news for the public finances — Britain’s debt was expected to peak at 86.4 percent of GDP this year — about double its level before the global financial crisis — before falling in the coming years.
The OBR budget forecasters said the fall in net debt was largely achieved by the sales of shares in state-run bank RBS and by an accounting switch to get the debt of housing associations off the government’s books.
UK slashes growth forecasts
UK slashes growth forecasts
Saudi Arabia’s Industrial Development Fund injects $3.19bn into the sector, minister confirms
RIYADH: The Industrial Development Fund provided SR12 billion ($3.19 billion) in financing to the Kingdom in 2024, boosting its global competitiveness, according to leading minister.
Speaking during a panel discussion at the Budget Forum 2024, Saudi Minister of Industry and Mineral Resources Bandar Alkhorayef highlighted the vital role of financing in driving industrial development.
“The Industrial Development Fund alone financed projects worth SR12 billion for 2024, but the total value of these projects exceeds SR60 billion,” Alkhorayef said.
He continued: “We have key indicators for the industrial sector: First, there are the licenses, which have seen significant growth. By the end of this year, more than 1,100 opportunities have been issued, and 900 factories have entered production. This is a very important key indicator.”
The minister went on to say: “The second key indicator is financing. Financing is a crucial driver for the industrial sector. The third key indicator is infrastructure. It is unimaginable to have a thriving industrial sector without properly developed industrial lands, primarily provided by the government.”
These key indicators are of great importance because they ensure the continued flow of investments into the sector, he added.
Alkhorayef also pointed to the Kingdom’s focus on promoting exports and supporting new sectors.
“Exports grew from SR458 billion in 2023 to SR528 billion this year, a 15 percent increase. This growth is largely driven by non-traditional sectors, showcasing the diversification of our economy beyond petrochemicals,” he said.
The minister highlighted the broader integration of industries, particularly between the industrial and mining sectors.
He praised Saudi Arabia’s streamlined approach to mining licenses, reducing wait times from eight to 10 years in advanced economies to just six months in the Kingdom, with plans to further reduce this to 90 days.
Alkhorayef emphasized the long-term vision of transforming Saudi Arabia into a hub for mining services and technology companies.
“Our investment in geological surveys has increased the estimated value of the Kingdom’s mineral wealth from $1.3 trillion to $2.5 trillion. This achievement positions the Kingdom as a future leader in mining and industrial innovation,” he added.
The industrial and logistics sectors have experienced significant momentum, with the government’s efforts driving a surge in private and foreign investment.
By aligning with Vision 2030, these initiatives aim to create a thriving, diversified economy that maximizes the nation’s geographic and resource advantages.
Transport sector achieves record growth and job creation
The Minister of Transport and Logistics Services Saleh Al-Jasser underscored the transport industry’s role as a key enabler of economic activity. He revealed that the sector achieved a 17 percent growth rate in just two years.
“International indicators also confirm this progress, such as the Logistics Performance Index, which saw an improvement of 17 ranks, as well as indicators for air connectivity, maritime connectivity, and road service quality,” Al-Jasser said.
He added: “Among other significant indicators is the reduction in fatalities and severe accidents on roads, achieved through an integrated national effort with other government entities. There is no doubt that progress has also been made across different modes of transport.”
The minister also highlighted that Saudi Arabia’s aviation sector is undergoing significant improvements, with a 50 percent increase in the number of international and domestic destinations connected to the Kingdom compared to pre-pandemic levels.
This reflects the sector’s rapid growth and its role in enhancing connectivity and economic activity.
A key goal of Vision 2030 is to create jobs and provide dignified employment opportunities for citizens.
“Saudi Arabia’s transport sector is at the core of our economic diversification efforts, providing critical infrastructure for all other industries,” Al-Jasser said.
He continued: “Investments exceeding SR447 billion have been made in the sector since the launch of the strategy. This includes more than 300 new aircraft ordered by national airlines, the highest in the Kingdom’s history, alongside significant expansions in logistics zones, maritime infrastructure, and other key areas.”
Al-Jasser highlighted the sector’s role in creating jobs, with 122,000 new employment opportunities generated by the third quarter of this year compared to the same period in 2023.
Additionally, women’s participation in transport has risen to 29 percent, a notable increase in a traditionally male-dominated field.
“The focus on developing local content has been equally impactful,” he emphasized. “The transport system has increased local content from 39 percent to 50 percent, putting us on track to achieve our Vision 2030 target of 60 percent.”
During the same session, the Minister of Communications and Information Technology Abdullah Al-Swaha highlighted Saudi Arabia’s rapid progress in the technology sector, attributing this success to investments in artificial intelligence-native companies and digital transformation.
“Today, companies like Mozn and Amplify are leading the charge in AI and innovative solutions. The Kingdom is positioning itself as a global powerhouse for tech-driven growth,” Al-Swaha said.
He continued: “The next phase will focus on technology manufacturing and exports. With the support of His Royal Highness the Crown Prince, we will further strengthen our National Program for Technology Development to ensure Saudi Arabia’s technological sovereignty and prosperity.”
Al-Swaha emphasized the Kingdom’s commitment to leveraging resources and infrastructure to build a globally competitive tech economy.
“This is a clear message to all tech professionals: we are ready to lead,” he concluded.
Saudi Arabia to introduce VAT refunds for tourists starting in 2025
JEDDAH: In a move aimed at boosting tourism, Saudi Arabia will begin offering refunds on value-added tax for eligible purchases made by tourists starting in 2025, the government announced.
The Zakat, Tax, and Customs Authority proposed changes to the VAT Implementing Regulations in August, which were open for public consultation via the Istitlaa platform until Sept. 17. The proposed amendments cover the definition of eligible goods, the refund process, and the role of authorized service providers in handling claims.
This initiative is part of Saudi Arabia’s efforts to enhance its global appeal as a tourist destination under the ambitious Vision 2030 plan. The National Tourism Strategy aims to attract 150 million visitors by the end of the decade and increase tourism’s contribution to the Kingdom’s gross domestic product from 6 percent to 10 percent.
In its 2025 budget statement, the Ministry of Finance noted: “The introduction of VAT refunds for tourists in Saudi Arabia is designed to improve the traveler experience while ensuring tax compliance.”
According to the proposed changes, tourists will be able to claim VAT refunds on goods purchased in Saudi Arabia for personal use, provided the items are taken out of the country. Certain goods, including vehicles, tobacco products, and food, will be excluded from the refund scheme.
Refunds will be processed through authorized service providers, who will verify eligibility, manage claims, and maintain the necessary records. These providers may charge a commission for their services, while ZATCA will retain the authority to review and reject claims if necessary.
The proposal defines a tourist as someone who is not a permanent resident of Saudi Arabia or any other Gulf Cooperation Council state that applies VAT. Transport crew members and other specific categories will be excluded. Tourists from GCC countries will be treated as non-GCC visitors until a unified VAT refund system is established across the region.
ZATCA’s governor will oversee the implementation of the refund system, including setting the conditions for eligible goods, processing refund requests, and authorizing service providers.
The VAT refund initiative is part of broader efforts to position Saudi Arabia as a leading global tourism destination. By refining tax policies and enhancing the shopping experience for international visitors, the Kingdom aims to attract higher spending and stimulate growth in the tourism sector.
This move also reflects Saudi Arabia’s focus on economic diversification and robust tax governance, reinforcing its competitiveness as a global hub for both tourism and investment.
Saudi Arabia sets new unemployment rate target of 5% by 2030, minister reveals
RIYADH: Saudi Arabia has revised its unemployment rate target to 5 percent by 2030, down from the previous goal of 7 percent, as part of Vision 2030’s ambitions, an official revealed.
During a panel discussion at the Budget Forum 2024, the Minister of Human Resources and Social Development Ahmed Al-Rajhi detailed the Kingdom’s strides toward improving employment figures.
“The unemployment rate among Saudis was 12.8 percent in 2018, and today it has dropped to 7.1 percent. The Vision 2030 target was to reduce Saudi unemployment to 7 percent by 2030, a milestone we have achieved six years ahead of schedule,” Al-Rajhi said.
He added: “For this reason, His Royal Highness the Crown Prince directed a review of this target, and now we have a new ambition: to reduce the unemployment rate among Saudis to 5 percent by 2030.”
The move highlights Saudi Arabia’s progress in building a robust labor market and achieving economic diversification under its reform agenda.
The human resources and social development system is deeply involved in implementing Vision 2030, contributing to eight of its 11 key programs and managing six specific workforce and social development strategies.
“One of the achievements of the system, and the government as a whole, is that this year we have achieved an overall unemployment rate of 3.3 percent, down from 6 percent in 2018,” Al-Rajhi said.
Regarding women’s involvement, the economic participation rate of females has reached 35 percent, exceeding the Vision 2030 target of 30 percent by 2030.
“We have surpassed the goal by 5 percent seven years ahead of schedule, and we now have a new target to aim for,” the minister said.
He continued: “The Ministry of Human Resources and Social Development has implemented 84 percent of the Labor Market Strategy over the past four years, creating 300,000 jobs in specialized professions such as engineering, accounting, pharmacy, and radiology. These efforts align with Vision 2030’s emphasis on building a future-ready workforce.”
Al-Rajhi explained that the Kingdom has been tasked with updating this strategy, and the ministry submitted a new ambitious plan to elevate the Saudi labor market to one of the strongest globally.
“The second phase of this strategy is now awaiting government approval,” he said.
To further strengthen the labor market, the ministry has launched initiatives like the Waad program in partnership with the private sector, which has provided over 1.3 million training opportunities to date.
Additionally, labor regulations have been overhauled, with more than 38 articles amended to ensure a modern and adaptable workforce framework.
New insurance products, such as domestic worker insurance and labor market insurance, have also been introduced to safeguard employees and employers.
“Regarding beneficiary satisfaction: previously, the ministry in the labor sector received 60,000 visitors to its branches across the Kingdom each month,” Al-Rajhi said.
He added: “After launching the automation service and targeting zero visits, the number has now dropped to 3,000 beneficiaries per month.”
The Minister of Education Youssef Al-Benyan highlighted the ministry’s efforts in aligning its strategies with Vision 2030.
He emphasized the cumulative nature of transformation in the education sector, pointing out that the ministry has been building on progress from previous years to achieve sustainable development.
“The allocation for the 2025 budget exceeds SR200 billion ($42.09 billion),” Al-Benyan said, underscoring the government’s significant investment in education.
He explained that this funding reflects the ministry’s comprehensive approach to enhancing spending efficiency, institutional performance, and transformation.
“Today, if we talk about 2025, we must also briefly discuss 2024 and previous years, where the Ministry of Education has been building on cumulative progress,” Al-Benyan said.
He continued: “This reflects a professional culture that needs to be strengthened within the government system— that work is cumulative, and transformation is a gradual, ongoing process.”
Al-Benyan also mentioned the ministry’s focus on embedding a professional culture of long-term planning within government systems.
He said: “Spending efficiency is not solely the responsibility of the financial sector but a collaborative effort across various sectors. This is why we have revisited the operational system’s role in the ministry to ensure alignment with broader national goals.”
The minister highlighted the importance of education as a foundational pillar for Saudi Arabia’s economic and social development.
This includes investing in academic and operational infrastructure, supporting the Kingdom’s workforce needs, and ensuring the education system meets global standards.
Closing Bell: Saudi main index slips to close at 11,590
RIYADH: Saudi Arabia’s Tadawul All Share Index ended lower on Wednesday, losing 145.28 points, or 1.24 percent, to close at 11,590.79.
The benchmark index saw a total trading turnover of SR6.02 billion ($1.6 billion), with 65 stocks advancing and 168 declining. The Kingdom’s parallel market, Nomu, also experienced a decline, dropping 438.11 points, or 1.43 percent, to close at 30,164.72, as 30 stocks advanced and 52 retreated. The MSCI Tadawul Index fell 22.41 points, or 1.52 percent, to finish at 1,451.98.
Tamkeen Human Resource Co. was the best performer of the day, with its share price rising 30 percent to SR65. Other notable gainers included United International Transportation Co., whose stock rose 6.54 percent to SR76.60, and Anaam International Holding Group, which saw a 5.98 percent increase to SR1.24.
On the other hand, Saudi Cable Co. recorded the biggest loss, falling 6.67 percent to SR90.90.
SHL Finance Co. also saw a decline of 4.74 percent, closing at SR16.90, while Filing and Packing Materials Manufacturing Co. dropped 4.12 percent, ending the day at SR43.
On the announcements front, Saudi Awwal Bank announced the launch of its riyal-denominated additional tier-1 sukuk offering.
The terms and amount of the sukuk will be determined at a later stage, based on market conditions. The minimum subscription is set at SR1 million, with a par value of SR1 million.
The return will also be determined later, depending on market conditions. The targeted investors are institutional and qualified clients in accordance with the Capital Market Authority’s rules. HSBC Saudi Arabia has been appointed as the sole lead manager for the sukuk issuance. The bank’s stock closed down 2.95 percent at SR32.15.
Tamkeen Human Resource Co. also released its interim financial results for the period ending Sept. 30, reporting a net profit of SR69.1 million for the first nine months of 2024. This marks a 40.7 percent increase compared to the same period in 2023.
The growth was primarily driven by a 40 percent rise in revenues, a 28 percent increase in gross profit, and a SR10.3 million rise in general and administrative expenses. Non-operating income also grew by SR10.1 million, highlighting the company’s strong financial performance and effective management of its operations and risks.
Saudi Arabia looks to non-oil growth for a stronger, more stable future
RIYADH: Saudi Arabia is focused on achieving high-quality growth through sustainable non-oil activities, aiming to boost private sector dynamism and productivity, while ensuring continued economic progress that goes beyond short-term expenditures, a minister stated.
Speaking during a panel discussion at the Budget Forum 2025 in Riyadh, Minister of Economy and Planning Faisal Al-Ibrahim highlighted that Saudi Arabia's growth rate has consistently ranged from 4 percent to 6 percent in recent years and is expected to continue at a similar pace in the years ahead.
“We aspire for more than just numbers. We also aim for high-quality growth — growth that is based on sustainable non-oil activities, not dependent on temporary expenditures that stop when the spending stops,” Al-Ibrahim said.
He further added: “The growth we expect for non-oil activities by the end of this year is approximately 3.9 percent, and for next year, it is projected to be 4.8 percent. These figures will be adjusted as estimates improve.”
Saudi Finance Minister Mohammed Al-Jadaan also emphasized that Vision 2030 is focused on establishing stable, sustainable public finances by reducing reliance on volatile revenue sources like oil.
“This is to guarantee the sustainability of funding for sectors that require a long-term horizon to achieve stability,” he said.
Al-Jadaan continued: “The difference between then and now is that spending is now sustainable and continuous because we have diversified the economy, diversified income sources, and utilized major fiscal policies.”
Al-Ibrahim stressed the importance of economic diversification in Saudi Arabia, pointing to tourism as a key example. He explained that without the deliberate focus on expanding the tourism sector and related industries, the country’s economic performance today would be significantly weaker.
“The growth we’re seeing in other sectors would not have compensated for the global changes affecting traditional sectors we used to rely on, such as the voluntary oil production cuts,” Al-Ibrahim said.
He added: “The role of tourism in the economy’s composition today is a testament to the strength and value of economic diversification.”
The minister also discussed the prioritization of economic transformation, with diversification at the top of the agenda.
“However, we’ve highlighted two key sectors: tourism and industry, along with their sub-sectors. Tourism helps us achieve rapid diversification and creates swift job opportunities. It also establishes a soft infrastructure for long-term investments, ideas, visitors, and industries,” Al-Ibrahim explained.
Al-Ibrahim emphasized that Saudi Arabia views the defense sector as a strategic priority and will continue investing in it for both national security and economic reasons.
“We have spent on defense and will continue to invest in it for several reasons, and its returns are strategic. Local content in the sector was at 4 percent, and today it has reached approximately 13 percent to 20 percent, with a target of 50 percent by 2030,” the minister said.
This focus on local content will prioritize complexity, as “many countries are now reinvesting in military sectors to meet strategic needs,” and the Kingdom is part of this global trend, focusing on peaceful objectives and long-term economic returns.
Al-Jadaan further explained that sustainable economic growth in Saudi Arabia heavily relies on maintaining stable and responsible public finances. To achieve consistent economic growth, the government must manage its financial resources effectively and direct them toward sectors that drive economic development and diversification, such as non-oil industries.
“Enabling public finance to support economic diversification is crucial. If public finance fails to allocate resources to the targeted sectors, or if it lacks commitment and consistency, the efforts may falter,” Al-Jadaan said.
He continued: “Fiscal policies consist of two components: government spending and the tax burden on the economy. These two policies are used to control and support the economy.”
Al-Jadaan acknowledged the importance of the structural reforms introduced at the start of Vision 2030, recognizing the challenges involved.
“Some of these reforms were considered painful,” he said, referring to difficult decisions such as reducing subsidies, introducing taxes like the value-added tax and excise tax, and imposing specific fees.
“These measures could have caused significant shocks in other economies, but the Saudi economy managed to overcome them,” he noted.
Al-Jadaan clarified that these reforms were not about imposing taxes and fees for their own sake, but about ensuring public finances could sustainably support the economy.
Reflecting on Saudi Arabia’s economic history, Al-Jadaan acknowledged that during the decades when oil dominated the economy, the country experienced rapid growth.
“The past 40-50 years were not wasted; we built a very strong infrastructure. However, this growth was not sustainable,” he said.
He explained that in the past, spending would rise and projects would be launched during periods of high oil revenue, but spending would stop, and projects would face delays when revenues fell.
Al-Jadaan also highlighted the evolution of Saudi Arabia’s fiscal policies. “We did not previously use debt instruments as we do today. Now, we use them to balance revenues and ensure continuous and sustainable expenditures. This allows for proper planning—not just for government entities and targeted sectors, but also for the private sector,” he said.
The shift toward sustainable spending has had significant benefits, Al-Jadaan emphasized, including improved services for citizens across various sectors such as health, education, and transportation.
“Sustainable spending supports a sustainable economy, which translates into better services for our citizens,” he said.
