Bank of America Merrill Lynch research also shows non-oil revenues up 63% during Q1
Saudi Arabia is on track to reduce its fiscal deficit this year as oil prices are forecast to steady at around $70 per barrel, according to new research by Bank of America Merrill Lynch.
Its MENA Economist Jean-Michel Saliba said the deficit stood at SR34.3 billion ($9.1 billion) in the first quarter of 2018, annualising at SR137 billion, below the government target of SR195 billion.
He said that based on $70 oil, the Saudi deficit could narrow to SR195 billion, which represents 6.3 percent of gross domestic product (GDP).
The research said oil revenues were disappointing at SR113 billion in Q1 despite being $12 per barrel higher than the year-earlier period.
It added that non-oil revenues stood at SR52 billion, up 63.1 percent on Q1 2017, reflecting the implementation of VAT, as well as improved Zakat collection.
Taxes on good and services stood at SR22.6 billion, up from SR5.7 billion a year earlier, likely largely driven by VAT proceeds, and the excise tax on soft/energy drinks and tobacco.
Saliba said: "We estimated SR23 billion in annual VAT proceeds and SR9 billion in annual excise taxes. The minor increase in other taxes suggests no major receipts from the introduction of expatriate worker levies. The latter may be bumpy due to collection timing."
The research said total spending stood at SR201 billion, down 44 percent on the previous quarter but 17.8 percent higher on the year-earlier period.
"This reflects the large burst of spending in Q4, partly on account of seasonality and to shelter the economy from the confidence shock arising from the November 2017 anti-corruption probe. Authorities highlight the pattern of spending may be less seasonal this year in order to support economic activity," added Saliba.
Compensation of employees and social benefits increased markedly by 20 percent and 184 percent to SR113 billion and SR18.8 billion respectively.
This is likely due to the January 2018 Royal Order as well as the introduction of the Housing Allowance program in December 2017, the research noted.