Saudi Arabia's non-oil revenue surges 63% in first quarter
Total revenue rose 15 per cent for the first three months of 2018
Saudi Arabia, the Arab world's largest economy, reported a 63 per cent year-on-year rise in non-oil revenue in the first quarter of 2018 on the back of improved tax collection in the kingdom.
Revenues for the three months to the end of March, climbed to 52.3 billion riyals, reflecting the success of medium-term fiscal plans and efforts to diversify the sources of government's income, the kingdom’s finance ministry said in its first quarter budget performance report. Total revenues for the first quarter of this year climbed to 166.3bn, a 15 per cent rise from a year earlier, it said.
Introduction of value-added tax, selective taxation and fees levied on expatriates' remuneration, in part helped boost non-oil revenues. Collection of zakat, an Islamic tax, also significantly improved over the first three months of the 2018, the ministry said in a statement posted on its website.
“The private sector's commitment, transparency, and cooperation in providing the government with its tax and zakat data, played a major role in increasing the non-oil revenues,” Mohammed Al Jadaan, the Minister of Finance, said. “It proved once more this [non-oil] sector's importance as one of the pillars in achieving Vision 2030 objectives.”
Opec’s biggest oil producer is looking to cut its dependence on oil revenues to fuel its economy in the wake of the three-year oil slump. Vision 2030, the overarching economic diversification programme lays emphasis on the development of the non-oil sector of the economy, cultivating a manufacturing industry and significantly increasing the contribution to the country’s gross development product. Levying of new taxes and fees and reduction in some of the state subsidies are also part of the government’s plans to cut fiscal deficit.
"Notably, taxes on goods and services accounted for 43.3 per cent of total non-oil revenue in the first quarter of 2018, up from just 17.7 per cent in the first quarter of 2017, reflecting reforms to deepen the revenue base," Monica Malik, chief economist at Abu Dhabi Commercial Bank said in a note on Tuesday.
Oil revenue reached 114bn riyals in the first quarter, a year-on-year rise of 2 per cent. Total expenses during the period rose to 200.6bn riyals, an 18 per cent increase from the same quarter the previous year, in tandem with the kingdom's efforts to drive economic growth and increase social benefits, the ministry said.
Government spending reflects a "marked shift" to a more expansionary fiscal stance in 2018. The two components that drove expenditure growth are higher compensation for employees and increased social benefits, Ms Malik noted.
"We see spending on these components remaining high with the additional support package in place for a year, including a monthly cost of living allowance," she added.
The budget deficit for the first three months came in at 34.3bn riyals, about 18 per cent of the expected annual deficit, it added.
"The fiscal figures for the first quarter of this year reflect rapid and significant progress in economic reform to help achieve the medium-term Fiscal Balance Program goals for 2023," Mr Al Jadaan said.
"This year, we are seeking to distribute government spending in a balanced manner throughout the fiscal year and reduce seasonal expenditure, in order to boost economic growth rates and maximise the benefits," he added.
Updated: May 8, 2018 04:14 PM