Saudi Arabia has shrunk its budget deficit to 4.3 percent of GDP compared to 15 percent in the first quarter of 2016 – suggesting that the recent phase of big government spending cuts is “over”, a report claims.
The latest outlook for the kingdom from research firm Capital Economics points out that the narrowing of the deficit to SR26.2 billion ($7 billion) came largely on the back of a substantial rise in revenues – most notably a 115 percent jump in oil receipts.
While Saudi Arabia cut oil production at the start of this year as agreed in the OPEC deal, this was more than offset by a rebound in oil prices, the report said.
Citing new quarterly public finance figures issued by the government on Thursday, Capital Economics said a “paltry” 1 percent year-on-year increase in non-oil revenues was “disappointing”, although it added that this was largely due to a drop in investment returns from the central bank SAMA (Saudi Arabian Monetary Agency) and sovereign wealth fund the Public Investment Fund.
The figures also revealed a reduction in government spending – total expenditure stood at SR170.3 billion ($45.3 billion) in the first quarter of 2017, down from SR174.7 billion ($46.5 billion) billion in the same period last year, and spending on subsidies and grants fell sharply, too.
However, the report noted that the reduction in spending, at 2.5 percent year-on-year, was much smaller than the falls of up to 25 percent recorded in 2015/16.
“In short, the big spending cuts seem to be over,” said Capital Economics. “The improvement in the budget position is a key reason why the authorities felt comfortable reversing cuts civil service benefits last month.
“We think there’s scope for austerity to be eased further in the coming months.”For all the latest GCC news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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