Economic Highlights of 2015 and 2016
Saudi Arabia, the largest crude oil exporter, shocked the world as it announced the budget for Fiscal Year 1437/38 (2016) where the Kingdom estimates to slash revenues from SR 608 billion in 2015 to SR 513.8 billion in 2016, over 15% swallow revenue target.
The government spending is estimated at SR 840 billion in 2016 from SR 975 billion in 2015, posing a fiscal deficit of SR 326.2 billion ($ 87 bn, £59 bn, €89 bn) in 2016 from SR 367 billion ($98 bn, £66 bn, €80 bn) in 2015. The total spending in 2015 has already been reduced to SR 975 as compared to SR 1,140 billion in 2014, by 14.5%.
Public debt also is expected to reach 5.8% of GDP, SR 142 billion, by the end of 2015 as compared to 2% of GDP, SR 44 billion, in 2014. The budget deficit is proposed to be covered through borrowing from domestic and international markets.
Oil Dependency
The plummeting oil prices in the international market have been trouncing the state’s revenues whilst ongoing conflict in Yemen has overburdened the economy on account of military expenditure.
This would mean that the government is expecting the oil prices to continue sliding down in the coming year too as the average rate of oil for 2015 has declined by 45% from the average of 2014.
Saudi Arabia economy is highly oil-dependent where oil revenues have been thrashed by 23% in 2015 as compared to 2014 and fell to SR 444.5 billion, 73% of total revenue. Non-oil revenue however has increased by SR 36.7 billion from SR 126.8 billion in 2014 to SR 163.5 billion in 2015, 29% increase.
Economy Structural Reforms
Ministry of Finance, Kingdom of Saudi Arabia while announcing Recent Economic Developments and Highlights of the Fiscal Years 1436/37 (2015) and 1437/38 (2016) on Monday, the 28-Decembe-2015 also proclaimed to a series of structural reforms in the state’s economy and to reduce its dependency on oil starting from fiscal year 1437/38 (2015) including:
- privatizing a range of sectors and economic activities
- reviewing current levels of fees and fines, introducing new fees, and completing the necessary arrangements for the application of VAT
- reviewing government support, including revision of energy, water, and electricity prices gradually over the next five years
Gross Domestic Product
Saudi Arabia GDP for the fiscal year 1436/37 (2015), in current prices, has decreased by 13.35% to SR 2.450 billion as compared to fiscal year 1435/36 (2014) where the oil sector is further expected to decline by nearly 43%. The GDP at constant prices have however is expected to rise by 3.35 in 2015 with oil sector to grow by 3%.
Saudi Arabian exports for the year 2015 are estimated to be SR 767.2 billion, a decline of 40% from the year 2014. The non-petroleum commodity exports, 22.9% of total merchandize exports, have also declined by SR 176.3, 18.8% from previous year.
Imports are expected to reach SR 531.9 billion in 2015 showing 10.5% decline from last year.
Saudi Arabia Monetary Agency also points to achieving a trade balance of SR 235.2 billion in 2015, 65.9% decline from last years as a result of the marked decrease in oil exports despite decline in imports.
The balance of payments account is expected to suffer a deficit of SR 154.9 billion in 2015 as compared to a surplus of SR 288.4 billion in 2014.
Saudi Arabia Stance
Saudi Arabia for last one year or so has been pushing up the crude oil production to rule out their rivals, the shale producers in North America and to secure their market share.
Brent traded crude oil at $36.85 a barrel on Tuesday which is a drastic decline from $115 in June last year when OPEC stinted its oil production stint.
Khalid Al-Falih who the chairman of “Aramco”, Saudi Arabian National Petroleum and Natural Gas company said in a news conference "We see the market balancing sometime in 2016, we see demand ultimately exceeding supply and soaking up a lot of the excess inventory and prices in due course will respond regardless of when and by how much”.
“Saudi Arabia is better equipped to wait out currently oil prices than other producers”, Al-Falih who is also the Health Minister. He further clarified that “Our production policy has been very clear; we will meet our customers’ demand and will not leave our customers short of energy.”