Revenue risks
The direction of oil prices will continue to remain a major factor in not only government spending, but the balancing of budgets and further economic reforms.
The pre-budget statement indicates growth in both revenue and expenditure estimates from the Fiscal Balance Programme (FBP) released at end-2017. The pre-budget statement pencils in about 100 billion Saudi riyals (Dh97.93 billion) in extra spending in 2019 from the FBP alongside a 135 billion riyal rise in government revenue.
While the pre-budget did not provide a breakdown of government revenues, it likely implies a rise in oil revenue — on the back of higher prices and production — over the outlook period, which will be accompanied by a more gradual pace of fiscal consolidation.
Revenue forecasts for 2019-2021 would require a Brent crude oil price of about $69-$74 (Dh253-Dh272) a barrel with Saudi oil production of around 10.5 million barrels per day (bpd). This is up from an oil estimate of some $60 a barrel, with production at 10.2 million bpd for the revised 2018 expenditure projections.
While the new official projections show the targeted budget deficit narrowing in 2019, there are no changes to the 2020 and 2021 numbers. Analysts see the fiscal deficit widening in 2019 with spending remaining expansionary and government revenue down with a fall in oil income.