In Ashmore’s recently released weekly report, the investment firm points to a potential “silver lining” in the drop in oil’s price for Saudi fiscal policy: the drop might at last bring “meaningful fiscal discipline” for the Saudi 2015 budget and beyond.
“The first ‘winner’ to emerge from falling oil prices is rationality,” writes John Sfakianakis, Regional Director for the GCC for Ashmore and SUSTG contributor, noting that expanding budgetary outlays by high annual rates (14%) is likely to see some change. “Saudi Arabia is also likely to finance more of its public spending with debt. Debt to GDP stands at just 2.7% of GDP,” the firm said.
Changes will not be drastic in 2015 but instead would “meander” in line with the actual spending versus the announced annual outlay targets.
“But unless oil prices spike in 2015 overspending on a sustained basis should now be a thing of the past. This is a good thing,” the firm writes.
