RIYADH- Saudi Arabia plans to cut spending by 7.5% in next year's budget to 990 billion riyals ($263.94 billion) from this year's 1.07 trillion riyals ($285.27 billion), according to a preliminary budget statement made on Wednesday.

It expects a 12% budget deficit for 2020, falling to 5.1% next year, the document showed.

Spending is expected to decrease to 955 billion riyals and 941 billion riyals in 2022 and 2023, respectively, with the deficit shrinking to 3% and 0.4% in those two years.

The retrenchment in spending comes as the world's largest oil exporter faces a deep economic contraction caused by the coronavirus pandemic and a drop in oil prices.

Saudi Arabia estimates the economy will shrink by 3.8% this year, the budget document said, a more optimistic projection than the 6.8% contraction estimated by the International Monetary Fund.

It estimates the economy will swing back to growth in 2021, growing by 3.2%, partly because of the "continued improvement in containing the pandemic," it said.

($1 = 3.7508 riyals)

(Reporting by Marwa Rashad, writing by Davide Barbuscia, editing by Larry King) ((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters Messaging: davide.barbuscia.reuters.com@reuters.net))