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Saudi back to deficit in Q2 as oil revenues slip

Saudi back to deficit in Q2 as oil revenues slip

In the first quarter, the kingdom had a budget surplus of SAR27.8bn, its first surplus since 2014

Saudi Arabia said on Tuesday it posted a budget deficit of SAR33.5bn ($8.9bn) in the second quarter of this year, reversing a surplus in the first quarter, its first in years.

The world’s biggest oil exporter posted SAR174.9bn in oil revenues in the second quarter, down 5 per cent compared with the same period a year earlier, and non-oil revenues of SAR85.8bn, 4 per cent less than last year.

In the first quarter, the kingdom had a budget surplus of SAR27.8bn, its first surplus since 2014.

“The surplus reflected exceptionally high transfers from Aramco and that was not expected to continue in Q2,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

In the first half of the year, the kingdom posted an overall deficit of SAR5.68bn, according to data published by the Saudi ministry of finance on Tuesday.

The International Monetary Fund expects Saudi Arabia will post a deficit of 6.5 per cent of gross domestic product (GDP) this year against a government forecast of 4.2 per cent deficit.

Last year Saudi Arabia posted a budget deficit of 5.9 per cent of GDP.

The latest data showed Saudi Arabia’s expenditures rose 5 per cent to SAR294.2bn in the second quarter from the same period a year earlier.

Expenditures rose 6 per cent in the first half of the year from the same period in 2018, broadly in line with a budgetary target of increasing spending by 7 per cent in 2019 to spur economic growth.

Capital expenditure rose 22 per cent in the first half of the year, reflecting government spending on housing and other development projects, Saudi Finance minister Mohammed al-Jadaan said in a statement.

The internal and external borrowing during the first half of the year was SAR67.9bn, which the government said will be used to finance part of the expected deficit until the end of the year.

Saudi economic growth has been sluggish this year, hit by output cuts by oil producers to support prices.

A recent Reuters poll of economists showed Saudi Arabia’s GDP will grow 1.7 per cent in 2019 and 2.1 per cent in 2020.

Three months ago, the forecasts were for growth of 1.8 per cent in 2019 and 2.2 per cent in 2020.

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