#SaudiArabia's Trillion-Dollar Makeover Faces Funding Cutbacks - Bloomberg

Saudi Arabia's Trillion-Dollar Makeover Faces Funding Cutbacks - Bloomberg

Saudi Arabia is likely to cut billions of dollars in spending on some of its biggest development projects, and place other plans on hold, as the kingdom grapples with the scale of its vast economic makeover.

A government committee led by the de facto Saudi ruler, Crown Prince Mohammed Bin Salman, is close to completing a sweeping review of mega projects including the sprawling desert development known as Neom, people familiar with the matter said, asking not to be identified as the information is private.

Neom, which is being developed on the Red Sea coast, is expected to be allocated 20% less than its targeted budget for this year, the people said. Its plans to launch a new airline for the area are on hold, they said.

Other developments being curtailed include Qiddiya Coast, an unannounced tourism and entertainment project in Jeddah on the Red Sea that had a potential budget of $50 billion at one point, according to the people.

The cuts mark a shift in priorities for Saudi Arabia, which under its Vision 2030 plan to reshape the economy has announced projects costing an estimated $1.25 trillion. Lower oil prices, weaker-than-projected foreign investment and at least three more years of deficits in the national budget means it must now decide what to focus on first and at what pace.

“The reality is that this kind of spending would create some sort of overheating in the economy and that’s not really desirable,” said Jean-Michel Saliba, Bank of America Corp.’s Middle East and North Africa economist. “There’s also a risk to the profitability of projects if they go ahead sort of unabated without financial constraint.”