Jeddah: Despite the global environment of lower oil prices, the Kingdom of Saudi Arabia maintains its counter-cyclical economic policy in the 2015 fiscal budget, according to a report by Jadwa Investment.
“It continues to highlight the government’s intention to stimulate the economy. We estimate that the allocation to investment spending remains elevated at SR278 billion which will support healthy economic growth and provide encouragement and opportunities for the private sector at a time of global and regional uncertainty,” Dr. Fahad Al-Turki, Chief Economist and Head of Research, Jadwa Investment, said.
The government’s budget for the 2015 fiscal year (31 December 2014 to 30 December 2015) was endorsed by the Council of Ministers on December 25. It was another expansionary budget with spending maintained at a very high level which will play a vital role in supporting the economy. The highlights are:
“For the first time since 2011, a fiscal deficit is projected, based on revenues of SR715 billion and expenditures of SR860 billion. Education and healthcare remain the focus of government spending, accounting for 43.8 percent of total spending. The deficit will be financed comfortably using Saudi Arabian Monetary Agency’s huge stock of net foreign assets, which totaled $736 billion at the end of November. Domestic debt was cut to a long-term low of SR44.2 billion in 2014, equivalent to only 1.6 percent of GDP.
“The budgetary performance in 2014 came up at the very low end of our expectations with a deficit of SR54 billion despite comfortable year-to-date level in both oil prices ($99.5 per barrel for Brent) and oil exports (7.1 million barrel per day). This first fiscal deficit since 2009 was mainly due to both falling revenues and rising expenditures. Total revenues slipped by over 9 percent compared to the previous year, yet remained above the SR1 trillion marks for the fourth year in a row. The growth in the fiscal expenditures, at 12.7 percent, was the highest in the last three years, exceeding the SR1 trillion marks for the first time.
“Preliminary economic data shows that 2014 was a healthy year for the economy with real GDP growth of 3.59 percent. Non-oil private sector maintained strong growth, at 5.7 percent year-on-year, with growth of construction, non-oil manufacturing, transport and communications sectors above 5 percent year-on-year. Elevated oil export revenues maintained a double digit current account surplus at 14.1 percent of GDP or $106.4 billion.
“We estimate a price of $56 per barrel for Saudi export crude (around $60 per barrel for Brent) and production of 9.6 million barrels per day are consistent with the revenue projections contained in the budget. We expect both revenues and expenditures in 2015 to be above the budgeted level and forecast a budget deficit of SR157.4 billion (6 percent of GDP) based on oil price of $79 per barrel for Brent.”