Saudi non-oil revenues up 80% as reforms pay off

Mohammed Al-Jadaan, Saudi minister of finance, announcing the first-quarter budget in May. (Reuters)
Updated 20 November 2017
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Saudi non-oil revenues up 80% as reforms pay off

LONDON: Saudi Arabia’s economic reform plans are paying off, with an 80 percent hike in the country’s non-oil revenues in the third quarter of 2017, figures published Sunday show.
The Kingdom, hit hard by the crash in energy prices from mid-2014, last year unveiled the ambitious Vision 2030 plan, which aims to wean the economy off its “addiction” to oil.
That plan appears to be working, with non-oil revenues hitting SR47.8 billion ($12.7 billion) in the third quarter, and total revenues up 11 percent to SR142.1 billion.
The former statistic highlights “the feasibility of the economic reforms” underway, the Ministry of Finance said in its budget performance update.
The figures also show increased efficiency in public spending and a further reduction of the deficit.
“The government continued to prioritize expenditure that directly benefits its citizens, with education being the single largest sector spend in the first nine months of 2017,” the ministry said.
State expenditure during the third quarter stood at SR190.9 billion, an increase of 5 percent year-on-year, with the deficit at SR48.7 billion.
For the first nine months of 2017, revenue hit SR450.1 billion, up 23 percent year-on-year, while expenditure was at SR571.6 billion, and the deficit was SR121.5 billion, a decline of 40 percent on 2016.
“Today’s figures show that we continue to move toward our ambitious economic reform objectives for the long term, including the delivery of a balanced budget,” said Mohammed Al-Jadaan, Saudi Arabia’s minister of finance.
“We are also on track to achieve our budget projections for 2017 ... Whilst economic challenges remain, the economic reforms and measures that are set in the Fiscal Balance Program within Saudi Vision 2030 have proved effective, contributing to an increase in non-oil revenues, and we are making progress in creating a stronger and more diversified economy.”
Al-Jadaan pointed to a recent International Monetary Fund report, which he said indicates “great confidence” in the future of the Saudi economy.
“We have also once again benefited from international bond markets, reflecting both the growing confidence in Saudi Arabia’s economy and its strong foundations. The significant international investor interest in our country has been evidenced by the huge numbers who turned out for the Future Investment Initiative in Riyadh last month that was organized by the Public Investment Fund,” he said.
“Our third quarterly budget update demonstrates our long-term commitment to increase our levels of transparency and financial disclosure. We know this is vitally important in maintaining the confidence of all our stakeholders if we are to deliver our Vision for the Kingdom.”


China’s real estate investment slows as caution sinks in

Updated 19 October 2018
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China’s real estate investment slows as caution sinks in

  • Property increases downside risks to economy
  • September new construction starts up by a fifth

BEIJING: Growth in China’s real estate investment eased in September and home sales fell for the first time since April, as developers dialled back expansion plans amid economic uncertainties and as additional curbs on speculative investment kicked in.
A cooling market could increase the downside risks to the world’s second-largest economy, which faces broader headwinds including an intensifying trade war with the United States.
However, while analysts acknowledge increasing caution in the property market, they say investment levels are still relatively high, suggesting a hard landing remains unlikely.
Growth in real estate investment, which mainly focuses on residential but also includes commercial and office space, rose 8.9 percent in September from a year earlier, compared with a 9.2 percent rise in August, Reuters calculated from National Bureau of Statistics (NBS) data out on Friday.
“I think overall, China’s real estate market is still resilient, and the decline in sales is within our expectations,” said Virginia Huang, Managing Director of A&T Services, CBRE Greater China.
“There is no sign that the government has relaxed their control, but it still has many methods and tools to support the market if the economy deteriorates rapidly,” Huang said.
Real estate has been one of the few bright spots in China’s investment landscape, partly due to robust sales in smaller cities where a government clampdown on speculation has been not as aggressive as it is in larger cities.
The market has struggled as authorities continued to keep a tight grip over the sector, ramping up control in hundreds of cities. Transactions fell sharply over the period dubbed “Golden September and Silver October,” traditionally a high season for new home sales.
Property sales by floor area fell 3.6 percent in September from a year earlier, compared with a 2.4 percent gain in August, according to Reuters calculations, the first decline since April. In year-to-date terms, property sales rose 2.9 percent in the first three quarters.
China’s central bank governor Yi Gang said last week he still sees plenty of room for adjustment in interest rates and the reserve requirement ratio (RRR), as downside risks from trade tensions with the United States remain significant.
The government has implemented four RRR cuts this year, releasing hundreds of billions in new liquidity to the market.
China has for several years pushed a deleveraging campaign to reduce financial risks, clamping down on shadow banking and closing many “grey” financing channels for real estate firms.
For many highly leveraged developers, there are already signs of increasing caution as exemplified by a surge in failed land auctions due to tight liquidity and thinning margins.
New construction starts measured by floor area, an indicator of developers’ expansion appetite, rose 20.3 percent in September from a year earlier, compared with a 26.6 percent gain in August, Reuters calculations showed.
That’s against the backdrop of seemingly looser funding conditions for China’s real estate developers, who raised 12.2 trillion yuan ($1.76 trillion) in the first nine months, up 7.8 percent from the same period a year earlier, the NBS said.
The growth rate compared with a 6.9 percent increase in January-August period.
“Many developers will face lots of maturing debt by the end of this year, and there are perceived risks in the economy, so they will be more cautious,” Huang said.
China’s housing ministry is considering putting an end to the pre-sale system that developers use to secure capital quickly, in an effort to crack down on financial risks in the property sector.
China’s home prices held up well in August, defying property curbs. But analysts expect additional regulatory tightening and slowing economic growth will soon take the wind out of the property market’s sails.
The National Bureau of Statistics will release September official home price data on Saturday.