Saudi Arabia's first quarter budget deficit stood at 34.3 billion Saudi riyals ($9.15 billion), around 18 percent of the total gap forecast for 2018, the finance ministry said on Monday. The kingdom - which is making concerted efforts to diversify its oil-reliant economy - has projected a deficit of 195 billion riyals, or 7.3 percent of gross domestic product (GDP), this year, down from 230 billion last year.
It plans to balance the budget by 2023. First quarter revenues reached 166.3 billion riyals, up 15 percent from the same period last year, the ministry said in a statement. Non-oil revenues jumped 63 percent to 52.3 billion riyals, mainly due to a 5 percent value-added tax and fees imposed on foreign workers introduced by the government in January.
Noting the strong non-oil growth, Finance Minister Mohammed al-Jadaan said the first quarter figures "reflect rapid and significant progress in economic reform." Total spending reached 200.6 billion, up 18 percent. Last week, Jadaan said the government was on track to cut the deficit to 7 percent of GDP this year.
Oil revenues rose only 2 percent, despite the recent rise in the oil price. The ministry said a switch to quarterly dividends for Aramco meant that impact would be seen in the second quarter. "We expect more improvement over the coming quarters, as spending becomes more efficient and as oil and non-oil revenues grow further," said Mazen al-Sudairi, head of research at Al Rajhi Capital.
He added that Al Rajhi Capital forecasts oil revenues to reach 540 billion riyals in 2018, exceeding government estimates of 490 billion. Saudi Arabia, the world's top oil exporter, does not disclose the oil price assumptions behind its budget. An International Monetary Fund official told Reuters that the Gulf Arab state would need oil prices to average $85-87 a barrel this year to balance its state budget.
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