Saudi Arabia’s Finance Minister Mohammed Al Jadaan on Sunday said the kingdom would adapt to current economic and geopolitical challenges and “downscale” or “accelerate” some of the projects being carried out under its Vision 2030 programme.
Asked whether Saudi Arabia had to "mark-to-market" its expectations regarding the goals of the 14-year long programme, Mr Al Jadaan said: “Absolutely, yes.”
The kingdom could increase its gross domestic product growth rate by boosting oil production but such an expansion would not be "quality growth, but quantity growth," the minister said during a panel session at a special meeting of the World Economic Forum in Riyadh.
Saudi Arabia, the Arab world's largest economy, launched the 2030 vision programme in 2016 to diversify its economy away from oil, support private-sector growth, improve female workforce participation and reduce the unemployment rate among citizens.
The kingdom has also announced a host of ambitious new projects to support its plans, such as Neom and the Red Sea Project.
The government was aiming to accommodate 1.5 million residents within The Line, a 170km-long linear smart city under construction in Neom, which is in the kingdom's Tabuk province.
However, Bloomberg reported last week the project now looks set to host fewer than 300,000 residents by 2030, with officials expecting only 2.4km of the project to be completed by that time. Neom did not respond to a request for comment.
On Friday, the Saudi Press Agency reported that out of the 1,064 initiatives introduced under the Vision, 87 per cent were complete or on track.
"We are not complacent but we are very pleased with what was achieved," Mr Al Jadaan said.
"A lot of the targets have been overdelivered, there are challenges obviously, and this is why I said we don't have any ego. We will change, we will adjust [or] extend some of the projects. We will downscale some of the projects [and] accelerate other[s]."
The minister's remarks come months after Saudi Aramco abandoned a plan to increase its production capacity to 13 million barrels per day from 12 million bpd currently.
Aramco’s decision may have been influenced by escalating costs of developing new projects, ample spare capacity and weakening demand outlook for crude amid growing adoption of renewable energy and electric vehicles, analysts said at the time.
“This year we have seen Saudi Arabia review their upstream capacity ... this is not because the kingdom will not invest in the upstream sector. It’s because commercially it makes more sense to scale back the plan," Amena Bakr, senior Middle East research analyst at Energy Intelligence, told The National on the sidelines of the event.
“Rethinking and tweaking their strategy is key in achieving a balance between meeting Vision 2030 goals and budgetary constraints."
Mr Al Jadaan also said developing economies should not be forced to pick a side between China and the US and its allies.
“We should avoid forcing them to make a choice between two countries or two groups of countries,” he said.
"I think it is very difficult to go to Africa and say: 'Listen, if you want us to help you, you need to stop dealing with China or if you want us to help, you need to stop dealing with the G7 [Group of Seven nations] or the US'.
"That is not a clear choice for them because they need all the help we can [give], whether it is from the South or the North.”
Deepening divergence
Meanwhile, Kristalina Georgieva, managing director of the International Monetary Fund, said the divergence in economic growth is “deepening”.
“In advanced economies, the US is doing well but the eurozone is not. Within the emerging market economies … India, Indonesia and Malaysia … are doing well. China came a bit above expectations in its first quarter but then we have a number of countries that are facing significant difficulties,” she said at the same panel.
"What has happened over the last years is countries used all the ammunition they had because of Covid, the war in Ukraine [and] then the cost-of-living crisis, but more shocks will come and rebuilding fiscal buffers is a priority."
Global debt hit a record $307 trillion in the third quarter of last year, with a big increase across the board in mature markets such as the US, UK and Japan as well as emerging markets, including China and India, according to the Institute of International Finance.
This year, a series of elections and persistent geopolitical tensions have raised worries about heightened government borrowing and fiscal restraint, in countries such as India, South Africa, Pakistan and the US.
Speaking about the need for greater co-operation between wealthy and developing countries, Ms Georgieva said poorer countries have to play their part by introducing economic reforms.
"They need to collect taxes, they need to fight corruption [and] they need to improve the quality of spending," she said.
"They need to demonstrate they are committed to their own people and the response must be that they get a huge deal of international support in debt restructuring."
Higher interest rates have made it difficult for countries to rebuild their capital buffers, while negatively impacting growth prospects around the world, the IMF chief said.
She also said elevated interest rates in the US lead to a stronger dollar, which, in turn, can cause the currencies of many other countries to depreciate, making it harder for them to combat inflation domestically.
"The path towards cutting interest rates in our view ... still remains open, we still think that we would enter 2025 in the US, with interest rates finally moving towards lower levels," Ms Georgieva said.
"But even with the start of interest rate cuts, it doesn't mean interest rates would fall down to where they were before the pandemic, so strong fiscal position [and] good management in our countries is necessity."
