2003 News Story

Fiscal Year 1423-1424 H (2003) State Budget: The Ministry of Finance issues report on the economy
The Ministry of Finance

The Ministry of Finance today issued a national financial report containing the actual outcome for fiscal year 1423 - 1424 (2003), highlights for the budget for fiscal year 1424 - 1425 (2004), and recent economic developments.


Outcome for Fiscal Year 1423-1424 H (2003)
The Ministry of Finance expects revenues to be SR 295 billions [U.S. $78.67 billion] and expenditures to be SR 250 billion [U.S. $ 66.67 billion] in 2003.  There have been increases in expenditures related to developments in the regional and domestic security situation and in expenditures related to the settlements of late payments. The remaining revenue will be used to retire part of the domestic debt.

The National Budget for 1424-1425 H (2004)
Some of the main features of the 2004 budget include:
• Total revenue for fiscal year 2004 are projected at SR 200 billion [U.S. $53.33 billion].
• Government expenditure for fiscal year 2004 is budgeted at SR 230 billion [U.S. $ 61.3 billion].
• The Next year’s budget includes new projects amounting to SR 41.6 billion [U.S. $11.09 billion], mostly in education, health, social development, roads, municipalities and water services.

Annualized appropriations for the development and public service sectors for 1424-1425 (2004) are:
• SR 63.7 billion  [U.S. $ 16.98 billion] for education, including technical and vocational trainings.
• SR 24.3 billion  [U.S. $ 6.48 billion]  for health services and social developments.
• SR   8.6 billion  [U.S. $ 2.29 billion] for municipality services.
• SR   7.3 billion  [U.S. $ 1.95 billion] for transportation and telecommunications.
• SR 15.1 billion  [U.S. $ 4.03 billion] for other infrastructural developments, especially in water, industry, and agriculture.

Specialized Development Institutions and Government financing programs

The Specialized Development Institutions (the Industrial Development Fund, the Agricultural Bank, the Real Estate Development Fund, the Credit Bank, and the Public Investment Fund) will remain active in providing credits to projects and services in industry, agriculture, and real estate. These credits are projected to reach SR 10.6 billion [U.S. $ 2.83 billion] in 2004.

The new budget also includes appropriations for government lending programs for private universities, colleges, and schools, as well as a program for loan guarantees for small and medium enterprises (SMEs) to enable them to obtain financing on appropriate terms. The program will be implemented by the Industrial Development Fund and guarantees will be provided by the Ministry of Finance and local banking institutions.

Economic Developments in 2003
1- Gross Domestic Product
GDP is estimated to have grown by 12 percent in current prices and 6.4 percent in constant prices in 2003, reaching SR 792 billion [U.S. $ 212.2 billion].  The increase in oil prices and quantities was a major contributing factor to this outcome, as the oil sector was expected to have grown by 22.9 percent in current prices.

Private sector GDP is estimated to have grown by 3.7 percent in current prices and 3.4 in real terms. The non-oil industrial sector is estimated to have grown by 3.9 percent:.  The construction sector grew by 2.8 percent; electricity, gas, and water by 6.2 percent; transport and communication by 4.3 percent; and wholesale, retail, restaurants, and hotels by 4.4 in real prices.

The robust growth in the private sector has been accompanied by a number of factors that have enhanced confidence in the national economy and should continue to have a positive impact on private sector growth. Among these are the sovereign credit rating by Standard & Poor's to the Kingdom (with A+ long-term local currency and A long-term foreign currency grades), the custom union among the GCC countries, the signed and upcoming agreements on natural gas exploration, private sector involvement in the power and water projects, and the IPO of part of the Saudi Telecommunication Company’s (STC) shares.

2 - General Price Level
Inflation, as measured by the cost of living index, is estimated to have increased by 0.51 percent in 2003, while the non-oil GDP deflator has shown a small increase of 0.29 percent.

3 - Balance of Payments
According to SAMA preliminary data, the Kingdom’s current account is estimated to have recorded a surplus of SR 101.9 billion [U.S. $ 16.98 billion] in 2003 compared to SR 44.5 billion [U.S. $ 11.87 billion] in 2002.  Non-oil exports are estimated to have grown by 1.6 percent in 2003, totaling SR 33 billion [U.S. $ 8.8 billion], representing 10 percent of total exports.

4 - Money and Banking
The government’s financial and monetary policies are governed by the objective of maintaining stable prices and exchange rates.  The broad money supply during the first ten months of 2003 grew by 4.2 percent, compared to 11.8 percent in the same period of the pervious year. Bank deposits recorded a growth of 4.5 percent during the first ten months of 2003, and total bank claims in both the public and private sector increased by 12.3 percent; with capital and reserves increasing by 2.9 percent and profits rising by 7.4 percent in the same period.

5 - Stock Market
The partial sale of STC shares and the substantial improvements in economic activities and investment environment helped the stock market to improve in 2003.  The National Share Index stood at 4384 as of December 11, 2003, compared to 2518 at the beginning of the year, representing an increase of more than 74 percent.  Value of shares traded amounted to SR 537 billion [U.S. $ 143.2 billion] at the end of November, 2003 compared to SR 134 billion [U.S. $ 35.73 billion] in 2002.