RIYADH, 1 November — Finance and National Economy Minister Ibrahim Al-Assaf said yesterday that Saudi Arabia would not be able to meet its forecast of a balanced budget this year after achieving its first surplus for 20 years in 2000.
“We expect a slight deficit in this year’s budget due to global events and the conditions the economy witnessed in the last weeks,” Al-Assaf told reporters. He gave no further details.
Economists said this outcome was not surprising, given that oil prices have fallen by about 25 percent in the past month and Riyadh was mulling output cuts with fellow OPEC members, to help shore up prices. Oil revenues make up around 90 percent of Saudi Arabia’s export earnings, 70 percent of state revenues, and nearly 40 percent of its gross domestic product.
The economists said that growth in the overall economy was likely to slacken from about 4.5 percent last year, but would still remain positive due to a buoyant non-oil sector responding to recent economic reforms.
This year’s national budget was prepared assuming that oil prices would stay at an average of $22 per barrel and production at 8.3 million bpd. It is expected that actual budget deficit this year would reach SR6 billion to SR10 billion.
Total government expenditures this year would reach SR215 billion including SR182 billion in current expenditures and SR33 billion capital expenditures. Total revenues are expected at SR209 billion including SR159 billion from oil revenues.
Minister Al-Assaf told reporters in Riyadh that international economic developments had affected the Kingdom’s revenues. “So we have to make spending prudently,” he added. Brad Bourland, chief economist at Saudi American Bank, said in a report last month that the economy would probably be flat in 2001 as a result of sharply lower oil revenues.
