Saudi Arabia records budget deficit of $4bn in Q2

Saudi Arabia records budget deficit of $4bn in Q2
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Saudi Arabia records budget deficit of $4bn in Q2
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The second quarter of 2024 saw an 18 percent increase in oil revenues compared to the same period last year. Shutterstock
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Updated 01 August 2024
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Saudi Arabia records budget deficit of $4bn in Q2

Saudi Arabia records budget deficit of $4bn in Q2
  • Report revealed 12% increase in revenues compared to same period last year, totaling SR353.59 billion
  • Taxes on goods and services constituted 50% of non-oil revenues

RIYADH: Saudi Arabia recorded a budget deficit of SR15.34 billion ($4.09 billion) in the second quarter of 2024, bringing the year’s first-half shortage to 35 percent of the annual forecast set by the Ministry of Finance.

The latest data indicates that the Kingdom is experiencing a lower-than-expected budget deficit for the year so far, indicating a shift in fiscal management or higher revenues than anticipated in the first half of 2024.

The ministry’s quarterly performance report also revealed a 12 percent increase in revenues compared to the same period last year, totaling SR353.59 billion. Meanwhile, expenditures rose by 15 percent, reaching SR368.93 billion.

Finance Minister Mohammed Al-Jaadan said in December that the Kingdom’s annual budget for 2024 was based on “very conservative” estimates of oil revenues.

Despite this cautious approach, the second quarter of 2024 saw an 18 percent increase in oil revenues compared to the same period of last year, totaling SR212.99 billion. Additionally, non-oil receipts rose by 4 percent, reaching SR140.6 billion.

The rise in oil revenues can be attributed to the increase in crude oil prices over the past year. In the second quarter 2024, the average crude oil price, based on the closing figure at the end of each month, was around $76.69 per barrel, compared to $71.83 for the same period in 2023.

This increase in revenues happened despite production cuts imposed by OPEC+ and additional reductions by the Kingdom, which scaled back output to 9 million barrels per day.

Taxes on goods and services drive non-oil revenues

According to the ministry, taxes on goods and services constituted 50 percent of non-oil revenues, totaling around SR70 billion.

The second-largest share, categorized as Other Revenues, accounted for 20 percent and included income from various sources such as public government units, including the Saudi Central Bank, sales from entities including advertising and port services, as well as administrative fees, fines, penalties, and confiscations.




Saudi Minister of Finance Mohammed Al-Jadaan said the Kingdom’s annual budget for 2024 was based on ‘very conservative’ estimates of oil revenues. File/AFP

Other taxes made up 17 percent, or about SR24 billion, while levies on income, profits, and capital gains accounted for 9 percent, totaling SR12.65 billion. This substantial contribution underscores the Kingdom’s efforts to diversify its income sources beyond oil, reflecting effective fiscal reforms and a broader tax base.

Saudi Arabia is actively working to diversify its economy through investments in non-oil industries such as tourism, entertainment, and renewable energy. Initiatives like Vision 2030 aim to reduce oil dependency by promoting a more diverse and sustainable economic landscape.

Expenditures

Saudi Arabia’s non-financial capital expenditure, often referred to as CAPEX, drove much of the spending growth in this period.

This category saw a 53 percent increase, totaling SR66.41 billion, and it encompasses investments in physical assets like buildings, machinery, and infrastructure, aimed at enhancing the Kingdom’s capacity and capabilities.

The ministry had indicated in its budget statement in December for the fiscal year 2024 that there will be increased spending during the coming years to expedite the implementation of key programs vital to the objectives of Saudi Vision 2030. Therefore, the quarterly deficit remains within expectations, reflecting prudent fiscal management.

Compensation to employees constituted the highest percentage share at 38 percent according to the ministry’s report and increased by 4 percent during this period. Utilization of goods and services came second making up 20 percent share and rising 19 percent compared to the same quarter last year.

This category represents the total amount spent on acquiring goods and services by the government for various purposes, such as operational activities or resale. It reflects the government’s consumption or investment in resources necessary for its operations, excluding any changes in inventory levels.

The ministry’s report indicated that the deficit will be covered through borrowing.

Domestic debt comprised 59 percent, or SR680.29 billion, of the total at the end of the period, while external borrowings made up the remaining 41 percent, totaling SR468.92 billion.

Compared to advanced economies and G20 countries, Saudi Arabia’s public debt as a percentage of GDP remains relatively low. Furthermore, it is well-supported by government reserves, providing a significant buffer against potential financial challenges or economic downturns. This strengthens the Kingdom’s fiscal stability and its capacity to meet financial obligations.


Oil Updates – crude heads for weekly loss as Chinese demand continues to underperform

Oil Updates – crude heads for weekly loss as Chinese demand continues to underperform
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Oil Updates – crude heads for weekly loss as Chinese demand continues to underperform

Oil Updates – crude heads for weekly loss as Chinese demand continues to underperform

SINGAPORE: Oil prices fell on Friday on signs demand in China, the world’s biggest crude importer, continues to underperform amid its uneven economic recovery.

Brent crude futures were down 65 cents, or 0.9 percent, at $71.91 a barrel by 7:50 a.m. Saudi time. US West Texas Intermediate crude futures were down 62 cents, or 0.9 percent, at $68.08.

For the week, Brent is set to fall 2.7 percent while WTI is set to decline 3.3 percent.

“While oil prices have somewhat stabilized around the $71.00 level of support this week, the lack of a concrete bullish catalyst suggests that price recovery remains tepid for now,” Yeap Jun Rong, market strategist at IG, said in an email.

The prospect of higher supplies from the US and OPEC+ along with doubts over China’s economic recovery continue to be of concern, while the odds of a December rate cut are now “closer to a coin flip” under a less dovish Federal Reserve, Yeap added.

China’s oil refiners in October processed 4.6 percent less crude than a year earlier, falling year-on-year for a seventh month, amid the closures of some plants and reduced operating rates at smaller independent refiners, data from the National Bureau of Statistics showed on Friday.

The decline in run rates occurred as China’s factory output growth slowed last month and demand woes in its property sector showed few signs of abating even though consumer spending increased, government data showed.

Oil prices also fell this week as major forecasters indicated market fundamentals remained bearish.

The International Energy Agency forecast global oil supply will exceed demand in 2025 even if cuts remain in place from OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies such as Russia, as rising production from the US and other outside producers outpaces sluggish demand.

The Paris-based agency raised its 2024 demand growth forecast by 60,000 barrels per day to 920,000 bpd, and left its 2025 oil demand growth forecast little changed at 990,000 bpd.

OPEC this week cut its forecast for global oil demand growth for this year and 2025, highlighting weakness in China, India and other regions, marking the producer group’s fourth-consecutive downward revision to its 2024 outlook.

US crude inventories last week rose by 2.1 million barrels, the Energy Information Administration said on Thursday, much more than analysts’ expectations for a 750,000-barrel rise.

Gasoline stocks fell by 4.4 million barrels last week to the lowest since November 2022, the EIA said, compared with analysts’ expectations in a Reuters poll for a 600,000-barrel build.

​Distillate stockpiles, which include diesel and heating oil, also fell unexpectedly by 1.4 million barrels, the data showed.


Fortune Global Forum to be held in Riyadh in 2025

Fortune Global Forum to be held in Riyadh in 2025
Updated 1 min 50 sec ago
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Fortune Global Forum to be held in Riyadh in 2025

Fortune Global Forum to be held in Riyadh in 2025

RIYADH: American football legend Tom Brady tossed a football to Saudi Arabia's General Secretariat of Council of Ministers Fahd bin Abdulmohsan Al-Rasheed who announced that the 2025 Fortune Global Forum will be held in Riyadh.

The elite of the world's business leaders will converge on Riyadh next year as the Fortune Global Forum makes its inaugural appearance at the Saudi capital.

Al-Rasheed joked that if he fumbled the ball, it was Brady's fault and if he caught it he is “a great player.”

 

The event, organized by Fortune magazine, is attended by presidents, chairmen and CEOs, as well as prestigious economists.

Fahd bin Abdulmohsan Al-Rasheed, chairman of the Saudi Convention and Exhibitions General Authority, said for the past 30 years the forum had brought together “the titans of industry around the world to the forefront of economic development.”

Speaking at this year’s forum, which concluded in New York on Tuesday, he added: “And that forefront today is the Kingdom of Saudi Arabia.”

He urged delegates to visit the Kingdom’s business epicenter to see what it had to offer.


Saudi Arabia launches company to transform Asir into global tourism hub

Saudi Arabia launches company to transform Asir into global tourism hub
Updated 14 November 2024
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Saudi Arabia launches company to transform Asir into global tourism hub

Saudi Arabia launches company to transform Asir into global tourism hub

RIYADH: Saudi Arabia’s Asir region has launched a new tourism venture through a partnership with the aim of creating a holding company to transform the area into a global tourist destination.

The collaboration between Aseer Investment Co., a subsidiary of the Public Investment Fund, and Rikaz Real Estate, aligns with the goal of transforming Asir into a world-class tourist destination that combines authentic heritage with sustainable development, according to the Saudi Press Agency.

The holding company seeks to contribute to enhancing a tourism environment that enriches guests’ experiences with unique offerings, connecting visitors to local culture and community traditions, SPA reported.

It is also committed to promoting sustainable tourism by protecting the environment, developing local communities, and collaborating with artisans and local businesses to preserve the authenticity of Asir’s heritage.

In October, the Kingdom’s Abha city secured a new investment partnership to boost tourism by developing culturally rich dining and retail experiences. 

PIF firm Aseer Investment Co. signed the deal with Nimr Real Estate and the National Co. for Tourism, or Syahya, to propel the project, the Saudi Press Agency reported. 

This aligns with the objectives of developing Abha, which will offer a range of benefits, including retail stores that reflect the cultural heritage of the Asir region.

The partnership also seeks to be a model for multiple collaborations with private sector investors and create more regional job opportunities.

Investments in the region are expected to create between 14,000 and 18,000 job prospects and contribute to up to 6 percent of the non-oil gross domestic product within 10 years, as outlined by AIC Chief Executive Osama Al-Othman in February.

Saudi Arabia emerged as a leader in tourism growth among G20 nations, experiencing a 73 percent increase in international visitors in the first seven months of 2024 compared to 2019.

According to the UN World Tourism Barometer report in September, the Kingdom welcomed 17.5 million international tourists during this timeframe, showcasing its growing allure as a global travel destination.

This surge is part of the nation’s Vision 2030 initiative, which aims to diversify the economy and reduce dependence on oil revenues.

“Saudi Arabia cements its global leadership and takes the first spot among G20 countries in international tourist arrivals growth, with a 73 percent increase in the first seven months of 2024 compared to the same period in 2019,” stated the Saudi Tourism Ministry on X.

Under the National Tourism Strategy, the Kingdom aims to attract 150 million visitors by 2030 and increase the sector’s contribution to the nation’s gross domestic product from 6 percent to 10 percent.

These goals reflect the country’s commitment to strengthening its tourism sector and enhancing its global appeal.


IMF, Saudi Arabia announce new annual conference tackling global economic challenges

IMF, Saudi Arabia announce new annual conference tackling global economic challenges
Updated 14 November 2024
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IMF, Saudi Arabia announce new annual conference tackling global economic challenges

IMF, Saudi Arabia announce new annual conference tackling global economic challenges

RIYADH: The International Monetary Fund and Saudi Arabia will jointly organize a high-level annual conference in AlUla to discuss global economic challenges, it has been announced.

The AlUla Conference for Emerging Market Economies will bring together a select group of finance ministers, central bank governors, and policymakers, along with leaders from the public and private sectors, representatives from international institutions, and members of academia.

According to a joint statement by Kristalina Georgieva, managing director of IMF and the Minister of Finance Mohammed Al-Jadaan, the first edition of this series will be held from Feb. 16-17, 2025.

“The world is confronting deeper and more frequent shocks, including from conflicts, geoeconomic fragmentation, pandemics, climate change, food insecurity, and the digital divide,” according to the statement.

They continued: “If not addressed adequately, these shocks put at risk emerging market economies’ hard-won improvements in living standards. Such setbacks would affect large segments of the world population and put at risk global growth and macro-financial stability.”

The gathering will offer a platform to exchange views on domestic, regional, and global economic developments and discuss policies and reforms to spur inclusive prosperity and build resilience supported by international cooperation.

Recent economic issues affecting the global landscape include rising inflation rates, driven by supply chain disruptions and increased demand for goods post-pandemic.

Supply chain delays continue to impact the availability of essential products, causing bottlenecks in manufacturing and increasing costs.

Additionally, geopolitical conflicts, such as the war in Gaza, have disrupted energy supplies and food exports, leading to global food insecurity and fuel price volatility.

Concerns over the using the Red Sea shipping lane increased dramatically at the end of 2023, when Houthi militants stepped up attacks on vessels in the wake of the escalation of the Israel-Hamas conflict.

The effects of these challenges pose significant risks to economic stability, especially for emerging markets that are more vulnerable to such global shocks.

The AlUla conference is the latest example of the growing relationship between Saudi Arabia and the IMF, with the organization in April establishing its first office in the Middle East and North Africa region in Riyadh.

The facility was launched during the Joint Regional Conference on Industrial Policy for Diversification, jointly organized by the IMF and the Ministry of Finance, on April 24.

The new office aims to strengthen capacity building, regional surveillance, and outreach to foster stability, growth, and integration, thereby promoting partnerships in the Middle East and beyond, according to the Saudi Press Agency.

The work hub will promote closer collaboration between the IMF and regional institutions, governments, and other stakeholders, according to the SPA report.

The IMF also expressed its gratitude to the Kingdom for its financial contribution aimed at supporting capacity development in member countries, including fragile states.


Closing Bell: Saudi Arabia’s TASI ends in the red, trading volume hits $2.95bn

Closing Bell: Saudi Arabia’s TASI ends in the red, trading volume hits $2.95bn
Updated 14 November 2024
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Closing Bell: Saudi Arabia’s TASI ends in the red, trading volume hits $2.95bn

Closing Bell: Saudi Arabia’s TASI ends in the red, trading volume hits $2.95bn

RIYADH: The Tadawul All Share Index concluded the last session of the week at 11,791.18 points, down by 139.27 points or 1.17 percent.

The MSCI Tadawul 30 Index also saw a decline, dropping 19.18 points to close at 1,481.36, reflecting a 1.28 percent loss. In contrast, the parallel market Nomu finished Thursday’s trading at 29,467.71 points, up 262.18 points or 0.90 percent.

TASI reported a trading volume of SR11.10 billion ($2.95 billion), with 51 stocks advancing and 182 declining. The top performer of the day was Saudi Cable Co., which saw its share price surge by 5.10 percent to SR92.70.

Other strong performers included Shatirah House Restaurant Co., which gained 3.75 percent to reach SR21, and Arabian Mills for Food Products Co., which rose by 3.08 percent to SR53.60. Naseej International Trading Co. and Saudi Real Estate Co. also posted notable gains.

The worst performer was Saudi Real Estate Co., which dropped 4.94 percent to close at SR10. Alkhaleej Training and Education Co. and Red Sea International Co. also suffered significant losses, with their share prices falling by 4.90 percent to SR29.10 and 4.84 percent to SR68.80, respectively. Astra Industrial Group and Al-Omran Industrial Trading Co. were also among the day’s largest decliners.

On the parallel market, Nomu, Alqemam for Computer Systems Co. was the top gainer, rising by 9.57 percent to SR103. Other gainers included Dar Almarkabah for Renting Cars Co., which climbed 9.10 percent to SR42.55, and Horizon Educational Co., which rose by 7.58 percent to SR79.50. Mulkia Investment Co. and Knowledge Tower Trading Co. also saw significant increases.

On the losing side of Nomu, WSM for Information Technology Co. recorded the largest drop, with its share price falling by 6.18 percent to SR44. Osool and Bakheet Investment Co. and Natural Gas Distribution Co. also experienced notable declines, with their shares dropping by 5.37 percent to SR37.85 and 5 percent to SR57, respectively.