Neom faces 20% budget cut amid continued drop in Saudi oil prices
Analysts say 'rightsizing' the mega project is a sign the kingdom is maturing in the face of deficits and lagging investment
Neom, the flagship mega-project of Saudi Crown Prince Mohammed bin Salman’s Vision 2030 economic roadmap, is facing budget cuts.
The development along the Red Sea coast is expected to be allocated 20% less than its targeted budget for this year, Bloomberg reports.
The revision comes as the kingdom reconciles lower-than-expected oil prices and foreign investment that has it on track for at least three more years of projected national budget deficits.
Saudi Finance Minister Mohammed Al-Jadaan has previously said the eight-year-old Vision 2030 plan may face delays because the kingdom needs to be careful about “overheating” the economy – which may cause inflation to rise.
“If you don’t allow your economy to catch up with your projects, basically what will happen is you’ll import a lot more,” Al-Jadaan said at the Qatar Economic Forum in May.
As a result, Saudi Arabia could lack the factories and other capacity needed to support its plans. “So giving it more time is actually wise,” he said.
Modifying the vision is not necessarily a bad sign, analysts told Bloomberg, echoing the Finance Minister’s comments. The “rightsizing” of projects is a sign the kingdom is maturing, according to Goldman Sachs’ MENA Economist, Farouk Soussa.
“What they’re doing in terms of adjusting these projects gives us a lot of comfort,” Soussa said. “They’re basically saying they’re not going to go for broke or bet the house on any one particular thing. If it’s possible, they’ll do it. If not, they won’t. They’re being quite sensible.”