Saudi deficit could fall below 5 percent if oil averages $60: Moody’s

Saudi deficit could fall below 5 percent if oil averages $60: Moody’s

DUBAI: The Saudi budget deficit could narrow to below 5 percent of GDP if oil averages around $60-a-barrel this year, said Moody’s.

That compares to a deficit of 11.2 percent of GDP last year.

Saudi Arabia reduced its budget deficit to SR7.4 billion ($1.97 billion) in the first quarter of the year, the finance ministry said on Tuesday, as the government reaped the benefits of reforms introduced last year.

“The decline in the government budget deficit during the first quarter of this year relative to the fourth quarter of 2020 is mostly due to higher oil prices and a large seasonal drop in spending,” said Alexander Perjessy, vice president, senior analyst at Moody’s. “But there is also a material structural improvement in the non-oil fiscal balance when compared to the first quarter on 2020. This improvement reflects a significantly higher non-oil revenue (+39 percent), largely due to the tripling of the value added tax rate last July, and the cut in capex (-47 percent), which is in line with this year’s approved budget.”