Saudi Arabia reported a deficit of 2.91 billion riyals ($770 million) in the first quarter of the year as the government increased spending on salaries and economic diversification projects.
(Bloomberg) — Saudi Arabia reported a deficit of 2.91 billion riyals ($770 million) in the first quarter of the year as the government increased spending on salaries and economic diversification projects.
Government income rose in the first quarter, driven by higher non-oil revenues, but was outpaced by a nearly 30% rise in spending, according to a budget report from the Ministry Of Finance published Sunday. The government “maintains a great ability to continue the expansionary fiscal policy and consider accelerating projects,” according to a seperate statement on the official Saudi Press Agency.
Oil revenues fell by 3% to 179 billion riyals in the first three months of the year on lower crude prices.
Non-oil revenues, which the government has focused on growing as it looks to move away from boom-bust cycles of the past, rose by 9%. That was driven by receipts from taxes on income, profit and capital gains rising by 75%.
While Saudi Arabia is predicting another budget surplus this year, after surging oil prices helped the budget back into the black for the first time in nearly a decade last year, other forecasters are predicting a deficit. The International Monetary Fund hiked the oil price Saudi Arabia needs to balance its budget this year to over $80 a barrel. The kingdom doesn’t reveal an oil price assumption in its budget.
Read: Saudi Arabia Needs Pricier Oil to Balance Its Budget, IMF Says
The Washington-based lender forecasts the kingdom will run a budget deficit of 1.1% of gross domestic product this year, a view that’s at odds with the government’s expectation for a second straight surplus it last estimated at 16 billion riyals ($4.3 billion).
The Saudi economy was the fastest growing in the Group of 20 last year, but it expanded at a slower pace in the first three months of this year to 3.9% vs 5.5% the previous quarter, as the oil sector grew at its lowest rate in more than a year, preliminary data released by the General Authority for Statistics showed Sunday.
Read: Saudi Arabia Says Fiscal Expansion to Balance Out Fed Hikes (1)
The data also showed:
- Public debt shrank to 962 billion riyals at end of the first quarter from 990 billion riyals at the start of the year
- Debt servicing costs increased 50%
- Social benefits spending rose by 52%
- Government reserves rose to 415 billion riyals and the government current account dropped to 35 billion riyals from 145 billion riyals at the end of 2022
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