Saudi forecasts $17.3-billion deficit in 2009

23 December 2008

The world's largest crude exporter, Saudi Arabia, has announced that it will cut spending next year by 6.9 per cent as oil prices have plummeted, hitting its revenues. Around 90 per cent of Saudi revenue came from oil exports.

The year 2009 will be Saudi Arabia's first budget deficit since 2001, as it  plans to raise public spending to stimulate its economy in an environment of declining oil price and global recession.

The government has fixed its state expenditure at 475 billion riyals ($127 billion),  lower than 510 billion riyals it spent in 2008. It has also projected a deficit of 65 billion riyals in 2009.

2008 saw the oil price touch a record high of 147 dollars a barrel which has seen government revenues sky rocketing to 1.1 trillion riyals ($293 billion) in 2008 and the country  expects to record a budget surplus of nearly 600 billion riyals (US$160 billion), which is more than three times its level in 2007.

The Saudi economy is driven by government spending and the forecasted deficit implies that the government is under pressure to prevent a sharp slowdown in 2009 as the global economic recession has direct impact on oil offtake.

Oil prices touched a low of $34 a barrel this month, near the lowest in four years, despite production cutsannounced by OPEC from its high of $147 in July mainly as many major economies, including the United States, Europe, China  and Japan are in  recession mode with  demands slowing down considerably.