Saudi Arabia posts Q1 deficit of $9.15bn

Saudi Arabia’s first quarter budget deficit stood at SAR34.3bn ($9.15bn), around 18 per cent of the total gap forecast for 2018, the finance ministry said on Monday.

The kingdom – which is making concerted efforts to diversify its oil-reliant economy – has projected a deficit of SAR195bn, or 7.3 per cent of gross domestic product (GDP), this year, down from SAR230bn last year.

It plans to balance the budget by 2023.

First quarter revenues reached SAR166.3bn, up 15 per cent from the same period last year, the ministry said in a statement. Non-oil revenues jumped 63 per cent to SAR52.3bn, partly due to a 5 per cent value-added tax the government introduced in January. Oil revenues rose 2 per cent.

Noting the strong non-oil growth, finance minister Mohammed al-Jadaan said the first quarter figures “reflect rapid and significant progress in economic reform.”

Read: Saudi hardship payments will boost economy, but could impact deficit

Total spending reached SAR200.6bn, up 18 per cent.

Last week, Jadaan said the government was on track to cut the deficit to 7 per cent of GDP this year.

Oil revenues rose only 2 per cent, despite the recent rise in the oil price. The ministry said a switch to quarterly dividends for Aramco meant that impact would be seen in the second quarter.

“We expect more improvement over the coming quarters, as spending becomes more efficient and as oil and non-oil revenues grow further,” said Mazen al-Sudairi, head of research at Al Rajhi Capital.

He added that Al Rajhi Capital forecasts oil revenues to reach SAR540bn in 2018, exceeding government estimates of SAR490bn.

Saudi Arabia, the world’s top oil exporter, does not disclose the oil price assumptions behind its budget. An International Monetary Fund official told Reuters that the Gulf Arab state would need oil prices to average $85-87 a barrel this year to balance its state budget.

Read: IMF says Saudi needs oil at $85-$87 to balance budget