Saudi Arabia sees $24bn budget surplus in 2022

Saudi Arabia has posted its budget statement for 2022; sharply revising its fiscal budget estimates upwards to SR90 billion ($24 billion) surplus from a previously expected deficit of SR52 billion, helped by oil prices and reform measures, a report said.

The split between oil and non-oil revenues for 2021 was 60:40 of oil: on-oil revenues, said Al Rajhi Capital, a leading financial services provider in the kingdom, in its report titled “Saudi Arabia Budget: Surplus expected for 2022”.

“For 2022, we believe oil revenues could reach SR655 billion in 2022 and we estimate non-oil revenue at SR400 billion taking total our estimate for 2022 revenues to SR1055 billion in 2022 (similar oil/non-oil mix as in 2021),” Al Rajhi Capital said in the report.

“ The government  expects total revenues to reach SR1,045 billion ($278.8 billion). Our key drivers are $75 per barrel (/b) Brent (vs $72/b Bloomberg consensus) and Saudi oil production of 10.7mmbpd. Our estimate for non-oil revenue of SR400 billion is driven by unchanged 15% VAT (SR88 billion estimated contribution in 2021), higher private sector growth, and PIF/SAMA investment returns. Based on our assessment, the budget breakeven is around $65/b Brent while Govt’s 2022 revenue is likely based on Brent at around $75/b, in our view.  Real GDP is like to increase by 7.4% to SR3615 billion in 2022.

“Expected Govt. spending of SR955 billion has been unchanged (vs. prior for 2022). We believe investments are led through PIF (SR150 billion till 2025) as well as other private expenditures. The efficiency in spending has improved, as in the last decade, actual expenditures usually had been higher than announced budgets and hence we forecast expenditures to be in-line with Govt. Estimate,” it added.

The Ministry has also published its estimates for 2023 and 2024. While the 2022 estimate is based on real near-term forecasts, with drivers of oil prices and production along with benefits from public reforms, the estimates for 2023/24 are based on structural/strategic estimates basing numbers on historical oil prices with adjustments to inflation, GDP growth, etc.  As per the filing, the near-term challenges are uncertainties due to the pandemic and oil market volatility.

Public debt is expected to remain stable (~29% in 2021) and remains reasonable compared to advanced economies (125.5%; source: IMF) and the emerging & middle-income countries’ debt levels (63.7%) especially post a surge witnessed after Corona related stimulus. The cumulative total deficit since 2014 is SR1.8 trillion which has been funded by debt (SR1 trillion) and reserves (SR0.8 trillion). The government expects no increase in debt in the coming years as there is likely to be a fiscal surplus, according to Al Rajhi Capital. – TradeArabia News Service




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