Riyadh – Mubasher: Saudi Arabia is set to announce the 2019 state budget on Tuesday amid the GCC nation’s efforts to diversify its economy and slash dependence on oil revenues.
However, the “unfolding dramas” were pulling Saudis in opposite directions, Bloomberg News reported.
“There’s been an explosion of international outrage over the Oct. 2 murder of columnist and regime critic Jamal Khashoggi by Saudi agents. That’s led some analysts to speculate that the government may seek to rally domestic support -- by taking steps to stimulate the economy,” the New York-based news agency added.
Moreover, the drop of global oil prices by around 30% over the last three years has been taking its toll on the revenue available to finance spending.
Fuel subsidies
In the pre-budget statement announced in September, the Saudi finance ministry stated that it will continue raising energy prices in an effort to grow non-oil revenues.
“The increases not only affect business costs but could also upset consumers long used to state subsidies,” the news agency added.
Earlier this month, Bloomberg reported that the oil-rich nation is reviewing the fees it imposed on expatriate workers after rising costs caused an economic pain and contributed to an exodus of foreigners.
The fees are unlikely to be cancelled altogether, authorities might adjust or restructure them, people familiar with the matter said. Awwad Alawwad, the Saudi media minister, denied the fees are being revisited.
Living allowance cost
In January, Saudi King Salman bin Abdulaziz ordered a one-year handout package for citizens negatively affected by fuel price hikes and new value-added taxes.
Analysts at the time said the measures would cost the government more than SAR 50 billion ($13.3 billion).
“Economists will be looking closely at whether the government allows the package to expire or incorporates it into 2019 spending,” Bloomberg said.
In August, the International Monetary Fund (IMF) expected Saudi Arabia’s budget deficit to reduce to below 2% of gross domestic product (GDP) next year.
The Washington-based fund ascribed its forecast in part to the royal allowances not being renewed.
The political unpleasant effects from the killing of Khashoggi “will probably sway the government to opt for higher spending,” Ziad Daoud, chief Middle East economist, told Bloomberg.
Revenue Challenge
The pre-budget statement also forecast revenues to hit SAR 978 billion next year.
The recent decline in oil prices makes that outlook “challenging,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
A drop in revenue could make it more difficult for the Saudi government to narrow its deficit.
