Saudi poised for another peak fiscal year

Saudi Arabia is set to bask in financial euphoria for the second year running in 2012 as the budget balance is expected to sharply widen and the Gulf Kingdom’s oil income soars to one of its highest levels.

Figures by a Saudi investment firm showed the economy of the world’s oil powerhouse could slip in current prices this year but real GDP will still record positive growth of around 3.1 per cent despite an expected fall in oil output.

The largest Arab economy has projected a fiscal surplus of only about SR12 billion for 2012 but the actual balance could balloon to SR91 billion ($24 billion) although Riyadh is again expected to overshoot budgeted spending, according to the Riyadh-based Jadwa Investments.

Its forecasts showed Saudi Arabia, which controls over a fifth of the world’s recoverable crude deposits, will net nearly SR824 billion in oil and non-hydrocarbon revenue this year, far higher than the projected SR702 billon. Spending could also surge to nearly SR733 billion from the planned SR690 billion, an increase of nearly 6.2 per cent.

Higher revenue will be a result of strong oil prices which are expected to average nearly $92 a barrel this year, around $13 below the $105 price in 2011. Saudi Arabia’s crude output is also expected to fall back to nearly 8.8 million bpd from 9.3 million in 2011 as the Kingdom largely boosted its oil supplies to offset a disruption in crude exports by war-battered Libya.

Jadwa expected the country’s oil revenue at nearly $229 billion, way below the 2011 income of $302 billion but above the oil earnings in 2010 and 2009.

The budget surplus will again allow Riyadh to cut its domestic debt to nearly SR115 billion or 5.5 per cent of GDP by the end of 2012 from SR136 billion or about 6.3 per cent of GDP at the end of 2011. The debt, which had accumulated in previous years because of persistent budget deficit and volatile oil prices, has sharply been trimmed from its peak level of more than 100 per cent of GDP in late 1990s and 40 per cent in 2005.

Jadwa expected the decline in oil prices and production to depress Saudi Arabia’s nominal GDP by 4.1 per cent to SR2,074 billion in 2012 from SR2,163 billion in 2011 after soaring by 28 per cent in 2011.

But real GDP is projected to swell by about 3.1 per cent albeit much below the 2011 growth rate of 6.8 per cent. The report attributed the expected growth in 2012 to a 5.7 per cent expansion in the government sector and a five pr cent rise in the non-oil sector. It forecast a 3.3 per cent fall in oil GDP.

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