Saudi budget deficit to narrow to SAR 111 bln in 2018: Jadwa

Saudi Arabia’s fiscal deficit is expect to decline to SAR 111 billion, or 3.8 percent of GDP in 2018, versus SAR 195 billion outlined in the 2018 fiscal budget statement, Jadwa Investment said in a recent report.

“A rise in yearly revenue at a faster rate than expenditure meant the fiscal deficit narrowed to just SAR 7 billion in Q2 2018, pushing the H1 2018 fiscal deficit to SAR 41.7 billion,” the report said.

“Looking ahead, we expect oil and non-oil revenue to continue rising at faster rate than expenses on a yearly basis. That said, higher than budgeted government revenue will not result in higher government expenditure, but rather, it will contribute to lowering the fiscal deficit,” it added.

Saudi Arabia reported total government revenue of SAR 273 billion in Q2 2018, an increase of 67 percent year-on-year (YoY). Non-oil revenue rose 42 percent YoY to SAR 89.4 billion for the quarter, and is expected to continue rising annually. This growth will be backed by increases in the expat levy, which doubled from SAR 100 to SAR 200 per dependent last month.

Meanwhile, government oil revenue rose by an even higher rate than non-oil revenue during the second quarter, surging 82 percent YoY to a total of SAR 184 billion.

The sharp rise was due partly to a switch to quarterly dividends, and as such, a part of Q1 oil contributions were received in Q2.

For the first half of 2018, government oil revenue stood at SAR 298 billion, accounting for 60 percent of the budgeted total for 2018.

“We expect the combination of higher Saudi oil export prices and crude oil production will result in government oil revenue rising to SAR 576 billion, against budgeted oil revenue of SAR 492 billion, and actual oil revenue of SAR 436 billion in 2017,” Jadwa said.

In the second quarter, total government expenses rose 34 percent YoY to a total of SAR 281 billion.

Current expenditure was up 31 percent YoY, pushed up by employee compensation, which rose 27 percent, or SAR 28 billion, over the same period

As of August 2018, the Saudi government issued a total of SAR 98 billion of debt for the year. As per the fiscal budget statement, debt issuances are not expected to exceed SAR 117 billion in 2018.

“At this rate therefore, we see a further SAR 19 billion in domestic bond issuances during the remainder of the year, taking total debt to SAR 560 billion at the end of 2018, equivalent to 19 percent of GDP,” Jadwa said.