Saudi Arabia registers its first quarterly budget surplus in two years

Saudi Arabia recorded a budget surplus – its first since 2019 – during the third quarter of this year as higher crude oil prices improved its finances, according to a report by the kingdom’s Ministry of Finance.

The Arab world’s biggest economy posted a surplus of 6.7 billion Saudi riyals ($1.8bn) while it earned revenues of 243.3bn riyals during the period. Oil revenues soared 60 per cent annually to 147.9bn riyals, the ministry said.

Non-oil revenues were up 33 per cent to 299.5bn riyals this year, while oil revenues surged by 25 per cent. The kingdom’s non-oil PMI rebounded in September, month-on-month, rising to 58.6, the highest reading since 2015, supported by improving business activity.

“The data supports our view that the government has prioritised deficit reduction this year as oil income has surprised on the upside relative to forecasts at the start of 2021,” Emirates NBD wrote in a note sent to clients yesterday.

“We estimate the full year budget deficit will shrink to minus 1.1 per cent of GDP this year from minus 11.2 per cent in 2020.”

Crude prices have rallied to multi-year highs as a faster-than-expected economic rebound spurred demand for energy.

Brent, the international benchmark under which two thirds of the world’s oil is traded, has rallied about 62 per cent this year and ended trading at $83.70 on Friday. West Texas Intermediate, the gauge that tracks US crude, has increased about 73 per cent so far and ended trading last week at $83.57.

Higher oil prices are, in turn, expected to positively affect the finances of oil-exporting countries.

The economy in Saudi Arabia, the world’s biggest oil exporter, is expected to grow by 2.4 per cent this year and by 4.8 per cent in 2022, the International Monetary Fund said in July.

The IMF attributed the growth to the country’s swift and effective response to the coronavirus pandemic and a growth in the kingdom’s nonoil sector.

The Gulf country’s non-oil economy is projected to grow 4.3 per cent this year, the IMF said.

The recent report from the Ministry of Finance showed that subsidies dropped 47 per cent, while social spending fell more than 40 per cent as the government rationalised spending.

Saudi Arabia has in the past few years adopted a number of measures, including tripling VAT to 15 per cent and removing a cost of living allowance as it adapted to a low oil price environment because of the ongoing pandemic.

The kingdom is also focused on diversifying the economy under its Vision 2030 programme that aims to cut its dependence on hydrocarbons and develop local industries and manufacturing capabilities.