Saudi budget signals economic recovery, say economists

Fri, 2016-12-23

JEDDAH: Saudi Arabia’s 2017 budget and spending boost announced Thursday suggests its finances are on the road to recovery, economists said, although one forecast that austerity measures would return.
The oil price crash plunged the Kingdom’s budget into the red, recording a severe deficit of SR366 billion in 2015.
But Thursday’s budget statement suggested that situation is easing and that the deficit is “now manageable.”
Despite plans to increase spending next year, the deficit is forecast to be SR198 billion in 2017, down one third from this year’s figure.
John Sfakianakis, the director of economic research at the Gulf Research Center, based in Riyadh, said that the Kingdom’s aim to eliminate the deficit altogether by 2020 looks achievable.
“It’s a very productive growth and pro-market budget that is setting the fiscal consolidation on a very viable path of achieving its 2020 balanced target,” Sfakianakis told Arab News.
“The 2017 expenditure will help build further confidence and will help bring private investment.”
Economist Nasser Saidi said that the Kingdom’s plan to reform energy prices was driving the plan to increase spending next year.
“The increase in projected revenues and expenditure is primarily due to the energy pricing reform program as well as higher international oil prices, although this will be partially offset by the targeted allowances for those citizens who need government support,” said Saidi, a former Lebanese economic minister and former chief economist at the Dubai International Financial Center.
Saidi, who is now president of advisory Nasser Saidi & Associates, said that the greater transparency reflected in the budget was a good sign ahead of the planned initial public offering (IPO) of state oil giant Saudi Aramco.
“Importantly, the budget reflects greater transparency and disclosure by the government which will be a positive signal to investors, both local and international. This should be seen as part of a strategy of greater transparency in the preparation for the Aramco IPO,” he said. “The Saudi authorities should be commended for the greater openness and desire for accountability, as this will encourage business to engage with government.”
Saidi said that the increased expenditure forecast for this year suggests a departure from previous austerity budgets.
“This should also act as a signal to other GCC countries to taper their fiscal consolidation and turn mode to encouraging growth,” he said.
But Jason Tuvey, Middle East economist at Capital Economics, said in a research note that he expects further austerity measures in 2018.
“While austerity seems to have been put on the back-burner next year, it is likely to resume from 2018,” wrote Tuvey.
“The government repeated its desire to balance the budget by 2020, one of the key targets outlined in the Vision 2030 and National Transformation Plan. Achieving this will require fiscal policy to be tightened further, albeit modestly compared with 2015-16. A value-added tax is scheduled to be introduced next year and we suspect that the government will keep a tight rein on spending.”
Tuvey pointed out that the budget was based on a relatively conservative oil price.
“The government isn’t easing the pace of austerity due to hopes for higher oil prices following the recent OPEC deal to cut output. Indeed, the budget has been based on a conservative oil price of just over $50 (per barrel), slightly below current prices of around $55,” he wrote.
“Instead, the easing of austerity reflects the progress made with fiscal consolidation over the past couple of years. Public spending has been cut by a cumulative 25 percent over the past two years and the non-oil budget balance has improved … The public finances haven’t improved on this scale since the early 1990s, following the end of the Gulf War.”
Tuvey’s overall view was that the budget was a positive sign for Saudi Arabia’s finances next year.
“Saudi Arabia’s budget suggests that, following a significant improvement in the public finances over the past couple of years, the fiscal stance will be broadly neutral in 2017. This supports our view that the economy should embark on a gradual recovery next year,” he wrote.

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Saudi budget 2017: Deficit forecast to drop to SR 198 billion

Ben Flanagan
Thu, 2016-12-22

JEDDAH: Saudi Arabia’s deficit is projected to decline by a third next year, according to a budget statement that is seen as a step toward eliminating the shortfall altogether by 2020.
The deficit for 2016 stands at SR 297 billion, around 9 percent lower than forecast, and far below the high of SR 366 billion seen in 2015, in the immediate fallout of the oil price crash.
The deficit is forecast to be SR 198 billion in 2017 and is “now manageable”, according to budget documents released on Thursday.
“The government has been able to finance the deficit by drawing from reserves and surpluses, in addition to borrowing SAR 200.1 billion on international debt markets,” the budget documents said.
The Saudi budget 2017 reiterated the Kingdom’s aim to eliminate the fiscal deficit altogether by 2020. This is in line with the Kingdom’s Vision 2030 and related programs, including the National Transformation Plan 2020.
In 2016, Saudi Arabia’s total revenues are expected to reach SR 528 billion, and are forecast to rise to SR 692 billion next year. Oil revenues for 2017 are estimated at SR 480 billion, 46 percent higher than the 2016 projections, while non-oil revenues are estimated at SR 212 billion, a 6.5 percent increase.
Expenditure for 2016 stood at SR 825 billion, excluding that related to the previous year, less than the SR 840 billion originally forecast. The expenditure in 2017 is estimated at SAR 890 billion, an 8% increase over 2016.
The total national debt for 2016 was approximately SR 316.5 billion, which is 12.3 percent of the projected gross domestic product (GDP) in fixed prices for 2016. Official documents showed that the national debt will not exceed 30 percent of GDP.
“Following successful debt issuances in 2016, debt issuance will continue as and when needed, subject to local and international market conditions,” the budget documents said. “The Kingdom will seek to raise further debt at attractive rates on international markets.”
This could include diversifying the type of issued debt by issuing Shariah-compliant instruments such as sukuk inside and outside the Kingdom. 

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OIC, Syrian expats slam terrorist attack in Jordan

Rodolfo C. Estimo Jr.
Thu, 2016-12-22

RIYADH: Various sectors in Saudi Arabia have expressed shock and outrage over the terrorist attack that targeted the historic Karak Castle in Jordan on Tuesday, for which Daesh claimed responsibility.
The general secretariat of the Organization of Islamic Cooperation (OIC) condemned the attack, resulting in the death of four Jordanian policemen and a foreign tourist during clashes with the radical militants while many others were wounded.
Dr. Yousef bin Ahmed Al-Othaimeen, OIC secretary general, offered his sincere condolences to the families of the victims and to the king, government and people of Jordan.
Al-Othaimeen stressed OIC’s solidarity with the Hashemite Kingdom of Jordan in its war against terrorism, which aims to destabilize the security and stability in the country, and the region as a whole.
He stressed the need for concerted local, regional and international efforts to eradicate the phenomenon of terrorism and violent extremism, and eliminate all its forms as it is a threat to international peace and security.
He reiterated the principled position of the OIC that strongly condemns terrorism in all its forms and manifestations.
Dr. Husam Junaid, a board member of the Syrian Expatriates Medical Association (SEMA), added that “we condemn the terrorist attack.”
“We’re of the belief that if you kill one human being, it is as if you kill the whole humanity. And if you save one life, it is as if you save the whole humanity,” said Junaid, who’s an internal medicine consultant in one of the government hospitals in Riyadh.
Khalil Al-Jehani, a practicing lawyer, added that what the terrorists did was horrible, senseless, and without reason at all.
“Under the law, they committed a heinous crime and they should be meted out a corresponding punishment,” said Al-Jehani, who received his master’s degree in law from the Southampton University in England in 1993.
Abu Omran, who is from Zarqa City, about 25km from Amman, added, “What the terrorists did was very bad, and if and when they’re caught they should be punished accordingly.”
“They don’t have the right to kill people, even if the latter had done something wrong against them. We have laws to punish us if we have done something wrong,” said Omran who works for a local company in the Saudi capital.

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OIC information ministers map out strategy to combat terrorism

Thu, 2016-12-22

RIYADH: A plan to map out and implement a media strategy to fight terrorism was given the green light by a high-profile conference of the information ministers of the Organization of Islamic Cooperation (OIC) in Jeddah on Wednesday.
The meeting also underlined the need to check the growing trend of Islamophobia, especially in countries where Muslims have been living as minorities.
The conference, whose theme was “The Role of New Media in Confronting Terrorism and Islamophobia,” voiced concerns over the growing number of “terrorist acts and their negative repercussions on Muslim communities.”
The OIC ministers of information reaffirmed that “terrorism has no religion, and is not exclusively associated with a specific nationality or place.”
The 11th session of the OIC information ministers agreed to devise ways and means to check and manage social media networks, which have been instrumental in instigating and recruiting youngsters as terrorists.
“As part of the new media strategy, a series of documentary films on terrorism and its adverse impact will be shown on social media,” said a statement released on this occasion.
The OIC conference discussed a range of issues on its final day, like the situation in Palestine; the role of media to restore peace and security in region; adoption of foreign media programs; bolstering efforts to set up an OIC TV station; and support for media organizations in member states.
The conference strongly condemned the terror attacks that took place this week, including Turkey, Germany and Jordan.
Referring to the new media strategy, a final communique released in Jeddah called for moderation and objectivity to be adopted by media houses. These will be the two main components of the OIC 2025 media strategy being promoted by the member states. The statement also emphasized “the importance of cooperation among member states in developing mechanisms to fight terrorism.”
The statement denounced the “criminal act by the Houthi militias, who launched a ballistic missile toward the holy city of Makkah.”
The conference also reaffirmed and endorsed the final communique of the emergency meeting of the OIC foreign ministers in November, which called for a collective stance against the heinous aggression and those behind it.
The OIC statement also commended efforts to hold interfaith dialogues among different religions. The next OIC information ministers’ meeting will be held in Istanbul, Turkey.

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