Saudi Arabia forecasts budget surplus in 2022 as oil prices rise

Saudi Arabia forecasts budget surplus in 2022 as oil prices rise

Saudi Arabia has said it will decouple government spending next year from a surge in oil revenues in order to shore up the state’s coffers, as it forecast a $24bn budget surplus in 2022 — its first since oil prices crashed in 2014.

Riyadh estimated that it would achieve a surplus of SR90bn ($24bn), or 2.5 per cent of gross domestic product, following a fiscal deficit this year forecast to be 2.7 per cent of GDP. The surplus, driven by higher oil prices and an end to pandemic restrictions, would accompany an almost 6 per cent cut in public expenditure, Sunday’s budget revealed.

“This surplus will be directed to boost governmental reserves, support development funds and PIF (the Public Investment Fund),” the budget statement said. It added that the budget was based on spending plans “not tied to the developments in global markets”.

The world’s largest oil producer, Saudi Arabia’s economy is forecast to grow 7.4 per cent in 2022, after growing by 2.9 per cent this year. Growth would be driven by high oil prices and “the expected improvement in non-oil GDP assuming that the economy continues to recover gradually from the effects of the Covid-19 pandemic”, the budget said.

Meanwhile, military spending