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

An Aramco oil facility south of the Saudi capital Riyadh. A stronger oil price could help narrow the deficit in Saudi Arabia says Moody's. (Reuters)

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.”
The Kingdom last year introduced a number of measures such as the tripling of a value-added tax and the removal of a cost of living allowance to help support the economy in the wake of the coronavirus pandemic.