In the northwestern desert of Saudi Arabia, a vast construction site is bustling with cranes and pile drivers, surrounded by a newly constructed road. Cutting through the site are a pair of tracks, forming the backbone of what planners envision as a high-speed rail system.
This infrastructure serves as the groundwork for The Line, a futuristic city project worth billions of dollars. The city is designed to accommodate 9 million residents between two 106-mile long glass skyscrapers towering over 1,600 feet high.
Neom, the brainchild of Saudi Crown Prince Mohammed bin Salman, aims to transform the region by attracting millions of new residents and revolutionizing technology and living standards in the country. It is a key component of Vision 2030, a plan to diversify the Saudi economy, create new industries, and generate employment opportunities for the growing young population.
The cost of Neom is estimated to be as high as $1.5 trillion. In recent years, the Saudi Public Investment Fund has directed significant investments into overseas ventures, attracting a wave of foreign investors seeking opportunities in the kingdom.
However, a shift in spending strategy has emerged this year, with a focus on domestic investments and reports of cost-cutting measures on large-scale projects like those in Neom. This change comes as Saudi Arabia faces a growing deficit and challenges in the oil market, with sustained low oil prices impacting the country’s financial outlook.
Questions arise about Saudi Arabia’s financial capacity to achieve its ambitious objectives. Will the kingdom need to adjust its spending plans to ensure long-term sustainability?
Experts suggest that the current pace of spending on mega-projects may not be sustainable in the long run. While the Saudi government has demonstrated flexibility in response to economic realities, there may be a need to reassess certain projects to align fiscal outlays with sustainable practices.
Saudi Arabia recently revised its growth forecasts and budget deficit estimates for the coming years, anticipating higher spending and lower oil revenues. The kingdom’s economy shifted from a surplus to a deficit due to increased public spending and reduced oil production under the OPEC+ agreement.
Despite these challenges, Saudi authorities remain committed to Vision 2030 and emphasize their readiness to manage deficits through diversification efforts and fiscal discipline. The country’s credit ratings and foreign currency reserves provide a solid foundation for navigating financial uncertainties.
Saudi Arabia continues to issue bonds and implement reforms to attract foreign investment and diversify revenue sources. While some analysts express skepticism about the feasibility of mega-projects like Neom, the government maintains confidence in the sustainability of its spending trajectory.
As the kingdom navigates economic challenges and adjusts its development plans, stakeholders emphasize the importance of transparency, fiscal discipline, and achievable goals to ensure long-term resilience and prosperity.
