Al Rajhi Cap expects govt oil revenues to range between SAR 400-500 bln in 2021

Government expenditure is relatively less important than in the past as regulatory changes such as women employment, e-governance, opening up tourism, mortgage subsidies, megaprojects by the Public Investment Fund (PIF) etc. can have cascading benefits that do not necessarily require direct large spending, Al Rajhi Capital said in a recent report commenting on the Saudi budget for 2021 announced on Dec. 15.

For 2021, Saudi government expects SAR 849 billion revenues, which is reasonable based on Brent price of $48 per barrel, according to the brokerage firm.

The firm expects government oil revenues to range from SAR 400-500 billion in 2021, depending on Saudi Aramco’s dividends to the government (total dividend payments ranging from $45 billion to $75 billion).

Non-oil revenue is estimated to be around SAR 400 billion on increased value-added tax (VAT) - contributing SAR 88 billion - reforms, higher private sector growth, in addition to investment returns from PIF and Saudi Central Bank (SAMA).

Al Rajhi also expects the productivity to be maintained despite the drop in spending, thus helping the budget to breakeven by 2023.

Moreover, recovery in the health of the private sector more than previously expected post the government reforms bodes well for employment and the economy.

According to data available with Argaam, Saudi Arabia's revenues for the 2021 state budget are estimated at SAR 849 billion, with forecast expenditures of SAR 990 billion and a deficit of SAR 141 billion, or 4.9% of the Kingdom’s gross domestic product (GDP).