DUBAI: The Vision 2030 strategy to diversify the economy has helped Saudi Arabia through the ravages of the COVID-19 pandemic and enabled the prioritization of people’s health, the Kingdom’s policymakers said on Tuesday.

Announcing a 2021 budget with spending of SR990 billion ($264 billion), King Salman said: “We have directed that the budget give priority to protecting the health and safety of citizens and residents, and to continue efforts to limit the effects of the pandemic on our economy.”

Crown Prince Mohammed bin Salman said 2020 had been a difficult year for the whole world due to the coronavirus pandemic, “but the Kingdom's economy has proven its ability to withstand its impact.”

“The crisis has been managed with great care and effectiveness, which led to the mitigation of the negative effects on the Saudi economy,” he added. 

The budget statement said: “Vision 2030 has been tried and tested by the pandemic, greatly enhancing the economy’s resilience and helping reduce the negative impact of the crisis.”

The projections for 2021 revealed that a downturn of 3.7 per cent of GDP is expected this year, followed by 3.2 per cent growth next year “on the assumption that economic activity will continue to recover during the year.”

Other key indicators showed the budget deficit rising to 12 per cent this year, largely because of falling oil revenues, before recovering to 4.9 per cent in 2021 and virtually disappearing — at 0.4 per cent — in 2023.

“This is planned through government efforts to enhance spending efficiency and achieve fiscal stability and sustainability,” the statement said.

Finance Minister Mohamed Al-Jadaan said 2020 had witnessed an “exceptional outcome” in how the Kingdom had dealt with the pandemic, with “brave decisions” such as suspending  Umrah pilgrimages and prayers in mosques.

He said that while aviation and tourism were still suffering, many other sectors were making progress. Business confidence in Saudi Arabia had bounced back and was among the highest in the world.

“The vaccines will be accompanied by an accelerated recovery of the economy,” Al-Jadaan said.

Saudi Arabia has been criticized for spending less on fiscal support during the crisis than other G20 countries, but Al-Jadaan said the Kingdom’s recession had been less severe so its fiscal measures were more effective than in other countries.

Public revenues in 2020 were hit by the downturn in global oil prices, causing the rise in the budget deficit, but Al-Jadaan said that “the Kingdom has been keen, through its leadership role in OPEC and in coordination with OPEC+ countries, to restore the stability of oil markets.”

The minister ruled out a revision of the 15 percent VAT rate in the short to medium term, but announced a boost to the privatisation program in 2021, when he expected the amount raised from the sale of government companies and assets to double to about SR30 billion.

In response to a question from Arab News about whether the resources of the Public Investment Fund were unfair competition for the private sector, the minister said: “The strategy of the Kingdom is clear in supporting and empowering the private sector. We do not want in any shape or form to compete with the private sector.

“But … there are areas where the private sector was hesitant to enter, and risks that the private sector cannot deal with, where the government is trying through the PIF and other tools to open up these horizons.”