Higher expenditures on diversification from oil amid lower oil export revenues resulted in a widening budget deficit in Saudi Arabia, the world’s largest crude oil exporter.
Saudi government deficit jumped by 80% from the first quarter to $1.4 billion (5.3 billion Saudi riyals) in the second quarter of 2023, as spending on social benefits and capital expenditures jumped, according to data from the Saudi Finance Ministry cited by Bloomberg.
Non-oil revenues rose substantially, but oil revenues only inched up 0.6% compared to the first quarter and plunged by 28% compared to the second quarter of 2022, the data showed.
Saudi Arabia continues to expect a budget surplus for full-year 2023, but many analysts do not.
The International Monetary Fund (IMF) said in May that Saudi Arabia needed oil prices at $80.90 per barrel to balance its budget this year.
Saudi Arabia’s economy is set to markedly slow down this year from last year’s 8.7% growth due to the oil production cuts the world’s top crude exporter is implementing in a bid to “stabilize the market.”
The Kingdom saw its economic growth forecast for 2023 slashed by the most among major economies in the World Economic Outlook Update by the IMF this week.
Lower exports and lower oil prices are already shrinking Saudi Arabia’s oil export revenues—the mainstay of its budget revenues accounting for around 80% of total export revenues. Saudi Arabia’s oil revenues plunged in May to the lowest level since September 2021, official data showed last month as the Kingdom lowered shipments while oil prices were significantly lower than in the spring of last year. Oil revenues slumped by 37.7% year over year to $19.2 billion (72 billion Saudi riyals) in May 2023.
Saudi Arabia’s continued efforts to prop up oil prices with large production cuts will slow down its economy, which could even shrink this year and become one of the worst performers among G20, from the fastest-growing economy in this group last year, analysts say.
By Tsvetana Paraskova for Oilprice.com