JEDDAH, 7 November 2004 — Saudi Arabia’s public spending is expected to increase by SR8 billion annually during the next five years, an economic report by the National Commercial Bank said.
The report observed tremendous progress in the country’s economic situation this year on the back of skyrocketing oil prices. Crude prices, hovering around $50 a barrel at present, had reached an average of $34.5 per barrel over the past six months.
Average Saudi oil export prices would touch $33 per barrel during 2004, registering a 22.2 percent rise compared to prices in 2003, the report pointed out.
The current oil prices are $14 higher than the prices estimated for the 2004 fiscal budget. “An addition of every dollar to oil prices will help the Kingdom earn $2.5 billion annually,” the NCB report said. In addition to rise in oil prices, the Kingdom’s oil revenues were poised to rise this year as a result of increase in production by one million barrel daily above its OPEC quota.
Oil revenues account for three fourth of Saudi Arabia’s total revenues and this revenue will continue to increase in the remaining period of the year.
The bank predicted that total government spending this year would reach SR265 billion including the spending on security, defense and ongoing fight against terror.
“By the end of 2004, Saudi economy will be completing two years of strong growth with the presence of a private sector having greater capabilities and a banking system having good capitalization,” the NCB report said. The bank also expected that gross domestic product would achieve a growth rate of 9.3 percent this year, three percent less than last year’s 12.1 percent.
The Kingdom’s non-oil sector is expected to grow by 4.7 percent this year compared to 1.9 percent last year. The public sector is to achieve a growth rate of three percent and the private sector 6.1 percent.
However, the report pointed out that the private sector’s contribution to the GDP would reduce from 40 percent to 36.3 percent this year. The NCB report comes after Crown Prince Abdullah last month announced plans to spend SR41 billion from this year’s budget surplus on welfare projects.
The crown prince also confirmed press reports that a lion’s share of the expected surplus from rising oil prices would go for the part repayment of public debts estimated at SR660 billion. “We have instructed the finance minister to allocate SR41 billion from the surplus for development projects,” the crown prince told the Saudi Press Agency. “The surplus came as a result of unexpected rise in oil prices... and the whole surplus will be spent for the welfare of citizens. The focus will be on projects that will have direct and considerable impact on the welfare and prosperity of citizens,” he said.
Prince Abdullah explained that SR30 billion from the surplus would be allocated for social and economic projects in the next five years, adding the government would give priority to projects in five sectors - water and sewage, roads and expressways, primary healthcare, school buildings, and technical and vocational education.
