ZCZC
BCN-10
SAUDI-ECONOMY-BUDGET
Saudi 2019 budget predictions optimistic: analysts
DUBAI, Dec 21, 2018 (BSS/AFP) – Top oil exporter Saudi Arabia is on course
to post a higher deficit and lower economic growth than budgeted, due to a
renewed fall in oil prices, economic experts said.
For the kingdom to achieve the objectives set out in its 2019 budget
released on Tuesday, oil prices must average at least $80 (70 euros) per
barrel, reports said.
The world’s largest crude exporter issued an expansionary budget for next
year, projecting record spending based on generous oil revenues, based on a
recovery of oil prices from depths plumbed in 2015.
But in the past few weeks, much of the earlier gains in oil markets have
been wiped out as prices dived by around 35 percent.
“Saudi Arabia’s 2019 budget was premised on optimistic assumptions
regarding oil prices that are likely to be disappointed,” London-based
Capital Economics said in a report on Wednesday.
“We think that oil prices will stay low and our end-2019 forecast for
Brent is $55 a barrel as global oil demand growth weakens,” it said.
Saudi Arabia projects a deficit of $35 billion next year, or 4.6 percent
of Gross Domestic Product (GDP), about 32 percent lower than the estimated
deficit of $52 billion for 2018.
Spending is estimated at $295 billion, the largest in the oil-rich
kingdom’s history, while revenues — mostly from oil — are estimated at $260
billion, up 24 percent on 2018 estimates.
“The authorities estimate that oil revenues will come in at 662 billion
riyals next year which, by our calculations, assumes that oil prices will
average around $80 a barrel,” Capital Economics said.
Saudi Jadwa Investment, an independent think-tank, estimated that oil
revenues will come in at least $9 billion lower than projections, due to the
renewed fall in oil prices.
It said this will result in a deficit of $44 billion, $9 billion higher
than the official projection.
Capital Economics expected the budget deficit to be around double the
government’s projection at around 10 percent of GDP.
The reports also said that GDP growth next year will be lower than the
government’s forecast of 2.6 percent — Capital Economics estimated a rate of
1.3 percent, while Jadwa predicted 2.0 percent.
Saudi Arabia has posted repeated budget deficits since oil prices crashed
in 2014, accumulating a combined shortfall of $313 billion since then.
But it has managed to reduce gradually the size of the annual budget gap,
thanks to the recovery of oil prices between early 2016 and October 2018.
It has also sought to bolster revenues by imposing a value-added tax,
levies on expatriates and hikes in fuel and power prices.
BSS/AFP/HR/0915