Saudi Arabia is at a crossroads, striving to maintain its dominance in the oil market while transitioning to a more diversified economy. Vision 2030 is the blueprint for this transformation, but soaring costs and a shifting global energy landscape present significant hurdles. Building ambitious megacities in the desert, like Neom, comes with an astronomical price tag.
As a result, the kingdom is bracing for a substantial financial strain, projecting a nearly $27 billion deficit in its 2025 budget.
The deficit. Saudi Arabia is projecting a budget deficit of approximately $26.9 billion for 2025. According to Reuters, the kingdom anticipates revenues exceeding $315 billion, while expenditures are expected to climb to $342 billion. The price of oil, a key driver of Saudi Arabia’s economy, is doing little to alleviate the situation.
A plan under strain. As a leading member of the Organization of Petroleum Exporting Countries (OPEC), Saudi Arabia has long sought to maintain high oil prices to support its economy. However, a confluence of factors is creating what experts describe as a “perfect storm” for the oil market.
The Wall Street Journal reports that OPEC has authorized the United Arab Emirates, another significant oil producer, to increase its market output starting in January. Meanwhile, other oil-producing nations, such as Iraq and Kazakhstan, are also pressing to expand production. This rising competition is complicating Saudi Arabia’s efforts to control the market and sustain high prices.
Brace for Trump. Adding to Saudi Arabia’s challenges, the U.S. could significantly escalate competition in the global oil market. With President-elect Donald Trump returning to the White House, his administration is expected to adopt a more aggressive stance on energy production. In his Nov. 6 victory speech, Trump declared, “The U.S. has more liquid gold than any country in the world. More than Saudi Arabia, and Russia.” His approach signals a determined push to dominate the energy sector.
Trump has already issued a warning to Europe: purchase more oil and gas from the U.S. or face heavy tariffs. Furthermore, the president-elect has made clear his intentions to expand domestic drilling. This stands in stark contrast to one of President Joe Biden’s final moves, which aimed to protect millions of acres of water from drilling activities. However, Trump has vowed to repeal those protections once in office, potentially upending global energy dynamics.
Vision 2030. Saudi Arabia’s drive for economic diversification through Vision 2030 stems from its recognition of these growing pressures. This ambitious strategy seeks to reduce the kingdom’s dependence on oil through mega-projects like Neom and other transformative infrastructure initiatives.
However, according to the Journal, the Saudis aren’t planning to start another oil price war like in 2014 and 2020. China is a major buyer, and its economy will be growing more slowly in the coming months (as well as undergoing its own green revolution). All of this means that the price of a barrel isn’t enough to sustain the multi-billion dollar investments needed to bring Vision 2030 to life.
It’s not cheap. Economic expert Brad Setser, writing for the Financial Times, illustrates the challenges facing Saudi Arabia’s Vision 2030 initiative with data that highlights the strain on the kingdom’s finances. The value of its oil exports has fallen, while imports—largely materials essential for Vision 2030, such as 20% of the world’s steel—have surged, underscoring the steep costs of building futuristic megaprojects.
But Vision 2030 isn’t just about creating state-of-the-art cities like Neom. Several major global events are on Saudi Arabia's calendar, necessitating substantial investments in infrastructure. These include the Asian Football Championship in 2027, the Asian Winter Games in 2029, the World Expo in 2030, and the recently announced FIFA World Cup in 2034. The price tag for these events and developments? A staggering $800 billion, with Neom alone accounting for $500 billion—though analysts believe the final cost could be far higher.
Controlled but with Nuances. In the face of these economic pressures, Saudi Arabia has adopted a careful approach. While critical infrastructure projects for upcoming events remain a priority, some elements of Neom and other Vision 2030 initiatives have been postponed or restructured to later dates. This reflects the kingdom’s acknowledgment of the long-term nature of its ambitions.
As Reuters reports, Saudi officials are candid about the extended timeline for Neom. Finance Minister Mohammed bin Abdullah Al-Jadaan has stated, “Neom is a 50-plus-year plan. If anyone is thinking Neom in its grand size is going to be built and operated and making money in five years, that’s foolish. We are not foolish. We are wise people.” He clarified that while some Neom projects might generate short- to medium-term returns, the broader program is designed for long-term transformation.
Funded—for now. Despite these challenges, Saudi Arabia appears outwardly confident, leveraging its Public Investment Fund to finance a significant portion of Vision 2030’s projects. However, the sustainability of this strategy hinges on the kingdom’s ability to influence oil prices and the actions of OPEC.
The stakes are high. Saudi Arabia can’t afford for the U.S. or other producers to erode its market dominance. A significant drop in oil prices would strain its ability to finance ambitious projects, and flooding the market with excess production risks depleting the kingdom’s oil reserves too quickly.
This precarious balance underscores why Vision 2030 is so critical. By diversifying its economy into technology, renewable energy, and other sectors, Saudi Arabia aims to reduce its reliance on oil revenues. Yet these are long-term strategies—and time isn’t on Riyadh’s side as global energy markets evolve rapidly.
While Saudi Arabia pushes forward, the rest of the world isn’t slowing down, further complicating its path to achieving Vision 2030’s transformative goals.
Image | Vision 2030
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