Saudi Arabia unveiled its 2017 budget last week with a budgeted SR890b ($237.2b) in spending, which is a SR50b ($13.3b) increase over the 2016 budget of SR840b ($223.8b).
In a note sent to investors, Riyadh-based Jadwa Investment released a report outlining Saudi Arabia’s efforts to reduce its deficit despite the increase in spending. Based on revenues of SR692b ($184.4b), the government is budgeting for a lower deficit this year at SR198b ($52.7b).
Key observations of the report from Jadwa are as follows:
-The government has reaffirmed its commitment to support the economy by budgeting for SR890 billion in spending compared with 2016’s budget of SR840 billion. Based on revenues of SR692 billion, the government is budgeting for a lower deficit at SR198.
-The budget statement highlighted plans to issue SR120 billion in new bonds, which we estimate will put the 2017 year-end public debt level at SR433 billion (16.4 percent of GDP).
-As part of realizing the targets of NTP 2020 and Vision 2030, the Kingdom has budgeted for a higher level of spending in 2017 compared to both the 2016 budgeted and actual amounts.
-However, taking into account the SR105 billion in spending on delayed payments, actual 2016 spending reached SR930 billion, implying that spending in 2017 will be lower.
-We estimate that budgeted capital spending has been raised significantly to SR260 billion in 2017, compared to SR76 billion in 2016’s budget.
-The 2017 budget statement included details of the Fiscal Balance Program, one of the programs highlighted in Vision 2030.
-The budgetary performance in 2016 came close to our forecasts with a deficit of SR297 billion (12.4 percent of GDP), an improvement over the record budget deficit seen in 2015, at SR362 billion.
-In line with our expectations, preliminary 2016 economic data shows that the economy continued to slow in 2016 with real GDP growth of 1.4 percent.
-We calculate that a Saudi export price of $52pb (around $55pb for Brent) and crude oil production of 10.1mbpd in 2017 are consistent with the revenue projections contained in the budget.
[For more detailed commentary and statistical analysis from Jadwa, please refer to the full version of the report (see attached).]
