Saudi Arabia won’t erase budget deficit by 2024, says Goldman

Saudi Arabia’s budget deficit will narrow into 2024 but the kingdom is unlikely to balance its books by then as the government forecasts, according to Goldman Sachs Group.

“In the medium term, we are cautious regarding the prospects for significant cuts to public spending, and see a gradual narrowing of the budget deficit to around 4.1 per cent of gross domestic product in 2024,” Farouk Soussa, a London-based economist at Goldman, wrote in a report. “The government, meanwhile, projects a balanced budget in this time frame, suggesting upside risks to our more conservative forecasts.”

The double shock of lower oil prices and the economic fallout of the Covid-19 pandemic sent the kingdom’s deficit into double digits in 2020. Goldman sees this year’s shortfall narrowing significantly to 6.4 per cent of GDP but remaining wider than the government’s 4.9 per cent target.

In its annual budget announcement, Saudi Arabia said it would cut spending 7.3 per cent in 2021 to SAR990bn ($264bn), while revenue is expected to rise to SAR849bn. Goldman’s own projection for Saudi revenue is slightly higher at SAR880bn, as the bank’s oil price assumption for the year stands at $53 a barrel.

More from Goldman:

• The government’s borrowing requirement is expected to be around $65bn in 2021
• The debt burden is expected to keep rising, though only gradually, with domestic issuance seen steadily increasing in the medium term and external issuance floating around $10bn-$13bn annually
• Non-oil revenue is seen rising on the tripling of value-added tax and a recovery in domestic production
• Expenditure is seen flat in contrast to the government’s estimate of a 7.3 per cent cut