Monday 22 October 2018

Spending through the PIF and NDF programmes will further
support GDP growth, says Moody’s.

Saudi govt spending to back GDP growth: Moody’s

DUBAI, December 21, 2017

The increased government spending in Saudi Arabia’s SR978 billion ($261 billion) budget for 2018 will support GDP growth in 2018, following a contraction in the economy in 2017, said Moody’s Investor Service in a new report.

Off-budget spending through the Public Investment Fund and the National Development Fund will further support this growth, it added.

The 2018 budget shows that the government stepped-up spending in the fourth quarter of 2017, and that this somewhat looser fiscal stance will continue in 2018, the report noted.

Moody’s also highlighted that fiscal performance in 2017, the planned budget deficit in 2018, as well as the updated medium-term forecasts until 2023 under the new Fiscal Balance Program are in line with its expectations and therefore do not change its view of Saudi Arabia's fiscal strength.

From a financing perspective, Moody’s expects the government will continue to tap international and local capital markets, and draw on its fiscal reserves.

Key points from Moody's report:

•    The preliminary deficit for 2017 reached SR230 billion ($61 billion or 8.9 per cent of the official GDP estimate). This is 16 per cent higher than the budgeted deficit of SR198 billion, but in line with our expectation of a 9 per cent of GDP fiscal deficit.

•    The quarterly spending profile shows that the government tried to stimulate the economy in the fourth quarter, with total spending up 39 per cent year-on-year (see Exhibit 1 below).

•    According to the budget document, the economy contracted by 0.5 per cent year-on-year in 2017, a bit less than our forecast of -1.0 per cent, with non-oil real GDP growth of +1.5 per cent (compared to our forecast of +1.3 per cent).

•    Revenues were SR696 billion (SR440 billion in oil revenues and SR256 billion from non-oil revenues), slightly higher than the SR692 billion in the 2017 budget.

•    Despite the significant pick-up in oil prices throughout the year, oil revenues were about 8 per cent below the budget target, mainly due to the delayed implementation of energy price reform; this confirmed our concerns about overly optimistic budget assumptions in 2017.

•    Nevertheless, non-oil revenue performance was very strong, maintaining a 36 per cent share of total revenues, the same as in 2016 and significantly above the 13 per cent average between 2010 and 2015.

•    Total spending of SR926 billion was 16 per cent higher than the SR890 billion budget figure. Following lower-than-budgeted spending in 2016, this is now again in line with the long-term historical performance, with government on average exceeding budgeted spending by 15 per cent-25 per cent.

•    The overrun was driven by higher spending on military and defence, education, and health and social development, which together exceeded their combined budget allocation by SR74 billion. However, this was partially offset by lower-than-budgeted spending of about SR33 billion on public programs and infrastructure. – TradeArabia News Service

Tags: Saudi Arabia | GDP | Moody’s |

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