Saudi Arabia’s budget deficit is forecast to comprise 21.6 per cent or SAR511 billion of gross domestic product (GDP) compared with 3.4 per cent or SAR96bn in 2014.
In its latest periodic review of the kingdom’s economy and fiscal status, the International Monetary Fund put the kingdom’s growth in 2016 at 2.2 per cent while budget deficit is set to suffer a major decline.
According to the report published by Al-Riyadh paper, the kingdom’s aggregate budget deficit for 2015-2019 is expected to reach SAR2.3 trillion; much higher than the total value of the surplus the kingdom achieved over the past ten years, which amounted to SAR1.9trn.
For the current year, the kingdom’s economy is expected to beat previous growth projections as oil prices continue to rebound.
However, keeping gross domestic product on an upward trend remains a challenge in the future due to uncertainty in global markets, lower revenues and the need to support current capital spending programmes.
The IMF said that Saudi Arabia, the world’s largest oil exporter, will cut capital expenditure in the 2016 budget and it also needs to revisit its spending schemes and re-channel financing to only priority projects.
In 2014, Saudi Arabia’s public debt comprised 1.6 per cent of its GDP and is forecast to rise to 6.7 per cent of GDP in 2016.
At the end of 2014, the kingdom’s reserves reached $732bn but they dwindled to $679bn at the end of May this year, according to figures by the Saudi Arabian Monetary Agency.
(SAR1 = AED0.98, at the time of publishing)