Saudi budget deficit to reach SAR 77 bln in Q4, says Jadwa

Saudi Arabia is expected to run a budget deficit close to SAR 77 billion in the final quarter of 2017, after trimming its deficit to SAR 49 billion in Q3 2017, Jadwa Investment said in a report on Thursday.

“This is because, firstly, the government has already raised SAR 57 billion through both an international bond and domestic sukuk issuance in October and, secondly, already holds SAR 18 billion in financing from previous quarters,” the firm said.

The Kingdom’s third-quarter budget is an improvement over last year, not on only a quarterly basis but also on a year-to-date basis, the report noted.

Revenue rose 11 percent year-on-year (YoY) in Q3 to SAR 142.1 billion, with oil revenue reaching SAR 94.3 billion, while non-oil revenue leapt 80 percent YoY to SAR 47.8 billion.

The substantial rise in non-oil revenue indicates that fiscal reform efforts appear to be bearing fruit, Jadwa Investment said.

“Looking ahead, there is likely to be a shortfall in government oil revenue with a further SAR 173 billion required in Q4 2017 to reach the full year budgeted target,” the firm noted.

“Meanwhile, we do expect to see year-on-year improvements in non-oil revenue in Q4 2017. The continued effects from the introduction of an excise tax on harmful products and dependent fees, which came into effect in July 2017, should all help raise non-oil revenues,” it added.

Elsewhere, Saudi Arabia is expected to significantly ramp up capital expenditure in Q4 2017, similar to the pattern observed in Q4 2016.

“That said, we have revised our full year 2017 capital expenditure down to SAR 195 billion, compared to SAR 260 billion previously, but this still equates to a rise of 6 percent YoY,” the report concluded.