Riyadh February 7 2024: Saudi Arabia’s fiscal break-even oil price for the budget has risen in recent years and forecasted to remain above USD90/bbl in 2024 before falling to USD85/bbl in 2025, according to Fitch rating agency.
A USD10/bbl movement in oil prices impacts our budget forecast by 2%-2.5% of GDP, holding other factors constant. A change in oil output by 500,000 b/d impacts the budget by around 1% of GDP.
Oil dependence remains a rating weakness. Oil revenue will account for around 60% of total budget revenue in 2024-2025 (albeit down from 90% 10 years ago) and oil GDP 30% of total nominal GDP.
“Saudi Arabia’s 2024 budget projects fiscal deficits over the medium term, of around 2% of GDP, marking a shift away from the previous set of medium-term figures that projected annual surpluses and a decline in government debt/GDP. Spending ran 14% ahead of budget in 2023 and in the latest projections spending in 2025 will be 15% higher than previously planned. This policy recalibration reflects a decision to make more use of the fiscal space to support strong non-oil economic growth and press ahead with economic and social priorities under the Vision 2030 strategic development plan” states Fitch rating agency.
“We forecast a budget deficit of 2.3% of GDP in 2024, similar to 2023 and slightly ahead of the 1.9% of GDP budget plan. We expect spending 3.5% above budget, at SAR1.3 trillion on higher capex and procurement. We also assume revenue to be higher than budgeted and higher than in 2023, despite our assumption that average oil production and prices will be lower. Revenue will be supported by performance-related dividends from Aramco. We forecast a wider budget deficit of 2.8% of GDP in 2025, assuming spending in line with budget plans, lower oil prices and higher oil production (10 million b/d)” Fitch added in its note.
