 "Saudi Arabia")
Saudi Arabia posted a budget deficit of 12.4 billion riyals ($3.30 billion) in the first quarter of 2024, the finance ministry said on Sunday, amid higher spending and lower oil revenue, but considerably narrower from the previous quarter.
The kingdom, which needs to spend hundreds of billions of dollars to fund huge projects aimed at weaning the economy off oil, recently increased its estimate of financing needs for this year to 138 billion riyals from $23 billion initially estimated.
Oil revenues reached 181.922 billion riyals in Q1, up 2% from the prior-year period, but non-oil revenues increased 9% year on year during the quarter.
Non-oil economic growth is a top government priority and the kingdom has accelerated policies to drive investment into tourism and expand the private sector.
But the need to spend has also increased and public spending was 305.820 billion riyals in Q1, up 8% over the same period last year, with subsidies and social benefits accounting for over 60% of the total.
Also Read
International Brent crude has averaged around $83.50 so far in 2024, while Saudi Arabia needs oil at $96.2 to balance its 2024 budget, the IMF forecasts.
"Unless oil prices trend up more than expected, the deficit is likely to be more than the 2% of GDP budgeted," said Justin Alexander, director at Khalij Economics and Gulf analyst at GlobalSource Partners.
Debt increased by 66 billion riyals, reaching a total of 1.12 trillion riyals, up from 1.05 trillion riyals.
"The government has made a strategic decision to use debt for deficit financing for several years; this is a reasonable approach...providing the spending does help to grow and diversify the economy as intended," said Alexander.
In the fourth quarter, the budget deficit stood at 37 billion riyals as sustained oil production cuts and lower prices last year weighed on revenue in the world's top oil exporter.
"The deficit is contained in Q1 of 2024, and the overall fiscal position should benefit from a higher average oil price from Q2," Monica Malik, chief economist at Abu Dhabi Commercial Bank said.
