Riyadh – Decypha: Saudi Arabia's budget deficit is forecasted to narrow during 2017, mainly due to higher oil prices, discipline in spending, and non-oil revenue measures, according to a new research note by Bank of America Merrill Lynch.
BofA Merrill Lynch said it sees the 2017 budget deficit at SR316 billion ($85 billion), about 12% of the Gulf kingdom's GDP, compared to a deficit of SR402 billion in 2016, which represented 16.9 percent of GDP.
The underlying spending discipline kept the 2016 fiscal deficit in line with budget targets. However, the repayment of contractor arrears (SR80 billion) and spending related to surplus projects (SR25 billion) drove the 2016 fiscal deficit wider, reported Arabian Business.
Oil Price on the other hand has noted that Saudi Arabia has faced severe budget struggles since oil prices collapsed in 2014. Markets have been however recovering since last November, when the Organization of Petroleum Exporting Countries (OPEC) agreed to limit the bloc’s output to reverse the global supply glut.
General consensus amongst oil experts says prices will stabilize at approximately $60 a barrel - roughly half of the $120 barrel highs seen before the market crash in 2014. New oil supply from American shale oil producers as well as reduced global demand has pulled prices down in a lasting way.
The Saudi Arabian monarchy has published a “Vision 2030” plan for the country that revolves around diversifying the economy away from oil exports. One part of the plan involves the initial public offering of five percent of Saudi Aramco in 2018 to raise funds for the economic overhaul. Several financial centers, including New York, London and Tokyo, are competing to host the IPO – the largest in modern financial history, reported Al Bawaba.
Unrest regarding the austerity measures in place to reign in the budget has the monarchy concerned for its stability. In January, Riyadh suspended the implementation of austerity measures in the first half of 2017 to ease financial burdens on a populace accustomed to heavy food and fuel subsidies.
By Decypha News Editorial Team
