THE BASELINE

Most reports last week focused on the SAR 84.3 billion third-quarter deficit. But a key detail is further down in the Ministry of Finance's report. Employee compensation, the largest budget item, increased 1% to SAR 435.8 billion. Capital spending went up 17%. Financing costs jumped 38%, and only subsidies grew faster among the reported lines. By our calculation, that's about one riyal out of every twenty from the SAR 1.10 trillion spent. Borrowing is getting more expensive for everyone. November's Sah savings sukuk pays 5.13%, up from 5.00% in October. If your 2027 plans depend on government spending, watch this line in December's budget. Interest is the one bill ministries can't delay.

Total compensation increased by 6.0% to SAR 624.1 billion. Operating revenue went up 2.3% to SAR 5,628 billion, while the gross operating surplus fell slightly by 0.1%. Pay grew more than twice as fast as revenue in the year before last week's royal order raised the Nitaqat floor to SAR 5,000, starting April 2027. One year of data does not make a trend, and the survey does not separate Saudi and non-Saudi pay. If you are planning budgets for 2027, use the new floor; the 2025 data already shows that wage growth was outpacing revenue.

Three weeks ago, in Issue 11, Alramz secured around SAR 670 million in Makkah bookings from buyers in 51 countries under the new non-Saudi ownership law. Last week, a country made a move. Danantara took ownership of the 1,461-room Novotel Thakher Makkah and 14 nearby plots, completing the deal ten months after signing. The hotel will host about 4,400 Indonesian pilgrims each Hajj season. With Indonesia's quota at 203,320, that's roughly 2%. The bigger opportunity is in the plots: plans include hotels with about 6,000 more rooms and a mall, worth over another SR2 billion. This shows Indonesia is shifting from seasonal rentals to owning its own rooms. If you manage a Makkah hotel that relies on block contracts from national missions during Hajj, your largest clients now have an option to stop renting.

Last Sunday, we shared the forum's five studies. This one comes at a price. According to King Saud University transport professor Mohammed Al-Manaa, Riyadh made up SAR 11.4 billion of the total, with congestion up 86% since 2016. The study also shows where demand is coming from: Riyadh gained 50% of new jobs since 2021, ride-hailing trips are expected to jump from 18 million in 2019 to 92 million in 2025, and 45% of the Kingdom's daily delivery orders—about one million—are in the Riyadh region. The report doesn't explain how it calculated the cost, and these estimates can vary widely depending on how you value an hour, so we see the SR18 billion as an indicator of scale, not an exact bill. Two of the study's suggestions—flexible or remote work and staggered working hours—do not require the new traffic authority it also recommends. If you manage a Riyadh team, you already have these options.

In the 38 weeks leading up to October 1, Saudi individuals were net sellers on Tadawul, offloading about SR22 billion and selling in 27 of those weeks. When TASI rose in 20 of those weeks, individuals sold about SR26.4 billion and were sellers in 19 of those weeks, while most buying came from foreign investors and Saudi institutions. When the market dropped, the pattern reversed: individuals bought SR4.4 billion, and foreigners sold SR5.9 billion. Since every riyal bought is also a riyal sold, these numbers show which groups were on each side of the trades, not who set the prices. If you handle investor relations for a listed company, your main buyers this year have been institutions rather than individual households.

According to Wednesday's pre-budget statement, spending in 2027 is expected to reach SR1.39 trillion, while revenue is projected at SR1.20 trillion. The main takeaway is that this year's deficit is now forecast at SR245 billion, higher than the SR166 billion estimated in the budget. Revenue is expected to come in above budget at SR1,190 billion, up from SR1,147 billion, even though the ministry predicts oil activity will drop by 21.8%. Spending is also set to rise to SR1,435 billion, up from SR1,313 billion. The deficit increase comes from higher spending rather than lower income. Next year, planned spending of SR1.39 trillion is higher than this year's budget but lower than what the government now expects to spend this year.

Point-of-sale spending fell to SR12.92 billion in the week ending 19 September, down 6.3% from the previous week, with 241.1 million transactions recorded. But this doesn’t necessarily mean consumers are cutting back. Education spending fell sharply by 42.8% to SR180.69 million, and spending on books and stationery dropped 18.4%. Meanwhile, furniture and home supplies spending rose 11.4% to SR503.8 million, which economist Talat Hafiz says is likely due to National Day promotions. We believe the drop in education spending is because most term fees and supplies have already been paid, though the data doesn’t confirm this. The figures for the week that includes National Day will be released soon, and those will be worth watching.

Saudi Arabia's merchandise trade surplus reached SR61.52 billion in the second quarter, a 62% increase from the previous year. While this suggests an export boom, the growth is primarily due to a 5% decline in imports to SR224.46 billion, rather than a significant rise in exports, which increased by only 4% to SR285.98 billion. The surplus expansion mainly reflects reduced imports. Export data covers April through June, and since 12 September, no crude has shipped from Yanbu, with shipments redirected east.

Oil activities at current prices reached SR310.09 billion in the second quarter, up 25.0% from SR248.08 billion a year earlier. On GASTAT's chain-linked volume table, the oil line fell 24.8%. One quarter, two directions. Coverage focused on the 4.7% fall in real GDP; the current-prices table fell less. Total output at current prices reached SR1.26 trillion, up 7.5%, in a quarter when real output fell. Less was produced, but more was earned, and payroll, tax, and procurement are settled in riyals, not volumes.

In July, new residential mortgage loans for individuals dropped 8% from last year, reaching about SR5.9 billion. Lending for villas fell even more, down 10% to SR3.7 billion. Meanwhile, banks increased their investments in government treasury securities by SR3.2 billion, bringing their total holdings to SR670.98 billion. Now, government paper makes up over 71% of what banks are owed by the public sector. People still want to buy homes, but they are no longer the most attractive borrowers for banks.

Revenue per available room fell by 16.3 percentage points year on year, dropping 23.2%. This was the biggest decline among Saudi cities, and JLL attributes it to weaker corporate demand. But just three days later, the office market report told a different story: Riyadh’s prime office rents rose 3% to SR3,320 per square metre in the same quarter, with Grade A occupancy nearly full and international firms competing for space. In the same city and the same three months, the trends moved in opposite directions. Corporate demand did not leave Riyadh last quarter. Instead, it stopped booking hotel rooms and started signing office leases.

Education payments via card terminals rose by 62.7% to SR446.08 million for the week ending August 15. However, total spending dropped by 2.8% to SR14.19 billion, with transactions down by 1.5%. This indicates that households spent a bit less and made fewer purchases before the school year started. Only essential bills, which people cannot put off, increased. (Arab News)

Saudi Arabia's foreign direct investment stock reached SR1,122.8 billion at the end of Q1 2026, up 12% year on year and representing about 32% of total foreign investment in the Kingdom. Total foreign investment stood at SR3,530.8 billion, up 18% year on year.

Consumer spending in Saudi Arabia surged 6.8% year-on-year, reaching SR425 billion in the first quarter of 2026. This growth, which includes spending made through cards, cash, and e-commerce, occurred alongside a GDP increase of just 3% and an inflation rate of 1.8%. When adjusting for inflation, real consumption growth was nearly 5%, outpacing the economy's overall growth rate. (Arab News)

The Q2 budget deficit, down sharply from Q1's SR125.7bn, but only 1% below the same quarter last year, in three months when oil revenue climbed 22%. Spending rose to meet it. The shortfall held. Every riyal of the SR160bn half-year gap was borrowed, none from reserves, which grew 8.06% to $494.55bn.

Total Saudi bank credit as of May, a record, up 16.2% in a year. Every giga-project render you've seen is, underneath, this number at work. The balance sheet is funding the build. (Arab News)