RIYADH: Saudi Arabian government said it has set 2016 revenue targets at 513 billion riyals, while spending may reach 840 billion riyals, according to a decree read out on state television.
Spending in 2015 was 975 billion riyals. Saudi Arabian stocks advanced after the government’s budget deficit for 2015 was better than economists expected.
The budget announcement comes against a worsening economic backdrop, after the plunge in oil prices curbed revenue, forcing the world’s biggest crude exporter to dip into its foreign reserves and tap the bond market. The budget deficit was expected to be as high as 500 billion riyals, but was narrowed due to “some procedures” the government took to boost the efficiency of state spending.
“The 13 per cent overshoot is less than what market has expected, especially since the war in Yemen was supposed to cost the Saudis a lot,” said Reda Gomaa, a portfolio manager at Mashreq Capital DIFC Ltd.
“That’s why the market reacted positively to the data.” The deficit is at about 16 per cent of gross domestic product, according to Alp Eke, senior economist at National Bank of Abu Dhabi.
The median estimate of 10 economists forecast a shortfall of 20 per cent of GDP this year, according to data compiled by Bloomberg.
While the government may reduce capital expenditure, it’s unlikely to reduce spending on healthcare, education or major infrastructure projects, according to Fahad Al Turki, the Riyadh-based chief economist at Jadwa Investment.
For 2015, the Kingdom will likely post a deficit of 20 per cent of gross domestic product, according to the median estimate of 10 economists in a survey. The shortfall will narrow to about 14 per cent in 2016, economists estimate.
