Record oil revenues coupled with higher than expected output will boost Saudi government income to an all-time high of 1.15 trillion riyals this year, according to Jadwa Investment.
Record Saudi state spending likely as oil revenues surge
Record oil revenues coupled with higher than expected output will boost Saudi government income to an all-time high of 1.15 trillion riyals (Dh1.12tn) this year, says Jadwa Investment.
The country's current account surplus will reach US$154 billion (Dh565.6bn), equivalent to 25 per cent of GDP, the bank said. As a result, GDP would swell by 5.1 per cent this year, rather than the 3.1 per cent the bank had projected in December. Growth was still down from the 6.8 per cent the bank forecast for last year.
The extra revenues should help to support a raft of projects under way across the country.
"There are important efforts under way to diversify the economy and these will continue as the government has a lot more money to enable projects to continue in the long term," said Paul Gamble, the head of research at Jadwa.
Oil income forms about 90 per cent of the government's total revenues. A rise in crude output last year helped to underpin a surge in public spending as the kingdom sought to appease citizens amid unrest in parts of the region.
King Abdullah unveiled a US$130bn spending package last year that included public employees receiving a bonus worth two months salary.
The stimulus has already seeped through to the non-oil economy this year, with business activity growth in the private sector rising to its highest in the six-month period to the end of January.
Investment in railways and other infrastructure schemes as well as mining and petrochemicals have all been supported by huge budgets in recent years.
Spending was not anticipated to reach the peaks of last year, Jadwa said. More recipients of unemployment benefit meant, however, that the bank had raised its expenditure forecast to 757bn riyals.
The bulk of the extra revenues is likely to be used to build up the foreign assets of the Saudi Arabian Monetary Agency.
"Higher savings give comfort that elevated levels of spending can be maintained for a number of years, as the reserves can be drawn down in the event of revenue shortfalls," said Mr Gamble.
Jadwa based its forecasts on an estimated oil price for this year of $119 per barrel. Futures rose by 14 per cent in the first quarter of this year, driven by concerns about Iran and disruptions in other producers such as South Sudan and Yemen.