Saudi 2019 budget indicates expansionary spending: Al Rajhi Capital

Saudi Arabia’s preliminary budget estimates for 2019 indicate expansionary spending, as the budgeted expenses have been increased for 2018, 2019 and 2020 by 5 percent, 10 percent and 9 percent, respectively, over previous estimates, Al Rajhi Capital said in a report on Sunday.

“Hence we expect the coming months and therefore Q4 to see higher than usual expenditure, at around 32-35 percent of the budgeted expenses for the year,” the investment arm of Al Rajhi Bank said.

The Saudi Ministry of Finance yesterday released its preliminary estimates for government revenues, expenditure and deficit. The government now expects a 13 percent increase in 2018 revenues and a 5 percent increase in expenditure this year, compared to previous estimates.

On a year-on-year (YoY) basis, revenue and expenditure are expected to rise 27 percent and 11 percent respectively, leading to an expected fiscal deficit of SAR 148 billion (versus SAR 195 billion previously), the report added.

“We believe this deficit to be a conservative estimate given that oil prices are currently above our expectation of $65 per barrel (implied from government revenue estimates) and exports are likely to increase post recent OPEC decision,” the report said.

The increase in expenditure will imply significant spending in the remaining months of 2018, pushing up growth and jobs. Even real GDP growth estimate at 2.1 percent in 2018 (up to 2.4 percent to 2021) is conservative given change in input factors and changing economic structure leading to cautious growth estimates, Al Rajhi Capital noted.