The Strategist

Saudi Arabia budget deficit rises to $ 8.9 bln


08/01/2019 - 11:26



Saudi Arabia’s budget deficit grew larger in Q2 as officials are ramping up spending to spur a weak economy.



The budget deficit reaches 33.5 billion riyals ($ 8.9 billion), compared with 7.4 billion riyals for the same period last year, the ministry said in a statement.

Costs increased by 5% compared with the II quarter of last year. This can be explained by a significant increase in capital expenditures and expenses for subsidies and social benefits. Oil revenues fell by 5% year on year, non-oil revenues fell by 4%.

The data clearly shows that the long-promised injections of state funds are finally being implemented. The government is trying to accelerate the economic growth of the world's largest oil exporter. This year, GDP is expected to grow by 1.7%, and this will be the second year of growth after a decline of 0.7% in 2017 according to Bloomberg.

“The key positive trend is an increase in capital expenditures, which indicates some processes in investment activity,” says Monika Malik, chief economist at the Commercial Bank of Abu Dhabi.

In the II quarter, capital expenditures amounted to 61 billion riyals, 27% more than the amount that the Ministry of Finance planned to invest in the implementation of housing projects and other development projects. Subsidy spending rose 71% as the government supported small businesses, the Finance Ministry said.

During this period, expenditures on social protection programs increased, including social security and student bonuses, living wage benefits for government employees, and the Citizen Account Program, which compensates low- and middle-income citizens for losses from the effects of austerity measures.

The reduction in non-oil revenues is associated with a 37% drop in "other income", which, the Ministry of Finance did not specify. Income from taxes on goods and services grew by 23%.

source: reuters.com




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