Saudi Arabia’s Q3 Deficit At $8 Bln Amid Spending Surge, Lower Oil Prices
Paris, November 5, 2024 (Saudi Arabia Breaking News) – Saudi Arabia logged a budget deficit of 30 billion riyals ($8 billion) in the third quarter, more than half of the country’s total deficit so far this year, as lower oil prices weighed on revenue and spending surged.
The kingdom recorded a deficit of 58 billion riyals in the nine months to September 30 according to figures published by the finance ministry on Monday. Saudi Arabia recently revised its 2024 deficit estimate to 118 billion riyals from 79 billion riyals initially projected in the budget, around 3% of GDP.
The budget deficit in the third quarter last year was $9.5 billion on sharply lower oil revenue but the nine month deficit was 44 billion riyals, below this year’s equivalent figure.
“We had always expected some overspending by the government versus the original budget, through still see a very manageable fiscal deficit of around 2.8% of GDP”, Monica Malik, chief economist at Abu Dhabi Commercial Bank said.
The kingdom has recorded total revenue of 956 billion riyals to the end of September, up 12% year-on-year, while spending in the same period stood at just over 1 trillion riyals, up 13%, government data showed.
Capital expenditure, primarily linked to infrastructure, spending rose by 33% in the first nine months as the government drives up investment.
State oil giant Aramco said on Tuesday it would maintain its generous $31.1 billion quarterly shareholder dividend despite a drop in quarterly shareholder dividend despite a drop in quarterly profit, a key source of support for government finances.
The world’s top oil exporter is “doubling down” on its multi-billion dollar economic overhaul, investing hundreds of billion of dollars to meet the objectives of its Vision 2030 economic transformation plan.
The plan aim to wear the economy off of oil dependency while investing in massive infrastructure projects aimed at kickstarting sectors such as tourism, sports, and manufacturing.
The kingdom’s total spending came to 339.4 billion riyals in the third quarter, up 15% year on year. Total revenue stood at 309 billion riyals in the third quarter, down from 354 billion riyals in the previous quarter.
With large scale events such as the World Expo 2030 and the Asian Winter Games looming, the kingdom is reviewing spending, under which some projects will be delayed or scaled back and other prioritized.
Oil output and prices are also expected to rise next year, driving a rebound in overall economic growth. The IMG projects oil prices will rise by 0.9% in 2024 to about $81 a barrel. It was previously said Saudi Arabia need prices at close $100 per barrel to balance its budget.
“The strategy of reducing the level of voluntary cuts will increase their growth but will also increase revenues, and also improve their external account”, Jihad Azour, the IMF’s director for the Middle East and Central Asia told Reuters in a recent interview.
The government has said it would use debt to plug fiscal deficits. Total debt at the end of September stood at 1.16 trillion riyals ($308.86 billion), up from 1.1 trillion riyals at the beginning of the year.
Analysts have said the public debt levels remain low for a G20 economy, and that falling interest rates and improved market conditions will support financing requirements.