Saudi fiscal constraints may undercut structural shift

Significance

The fact that state salaries in the first half of 2020 exceeded total oil revenue underlines the scale of the task -- and the difficulty of achieving fiscal goals without major progress on private sector diversification under 'Vision 2030'.

Impacts

• Despite prioritisation of leisure and entertainment projects, that sector lacks capacity to become a major driver of growth.
• The government could seize the opportunity to introduce new taxes.
• Capital flight might again become a problem.
• The government will borrow more abroad, including through state-owned enterprises.