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22 December 2016
On Thursday, 22 December 2016, the Council of Ministers endorsed the government’s budget
for 2017 and announced the final outcome of fiscal operations and macroeconomic perfor-
mance for 2016. The highlights are:
In 2016, actual government expenditures are expected to record their first back-to-back
decline since 1999, falling by 15.6% to settle at SAR825 billion. Actual spending will also
be 1.8% below budget, which is an inflection from the historical tendency to post double-
digit budget overruns.
The Saudi economy will register a moderate growth of 1.4% in 2016 on the back of higher
oil production that averaged 10.4 MMBD.
The government maintained a two pronged strategy of covering the funding gap via draw-
ing down reserves and debt issuances. Net foreign assets currently stands at USD536.6
billion while the government's debt increased to SAR316.5 billion.
The government had adopted a targeted fiscal expansionary policy in 2017 after two
years of fiscal consolidation that saw government spending falling by a significant 27%
from an unsustainable SAR1 trillion in 2014. The increased expenditure will be directed
towards projects and initiatives that enhance the absorptive capacity of the economy.
2017 annual budget release estimates revenues at SAR692 billion, a gain of 34.7%, while
expenditures are expected to reach SAR890 billion, increasing by 6.0%. Accordingly, the
budget will register another deficit, albeit lower than the last two years, supported by both
oil and non-oil revenues.
According to our estimates, oil prices will average USD55/bbl for the Arabian light spot
price and production will average 10.05 MMBD, thus, we project revenues and expendi-
tures to reach SAR702.5 billion and SAR882.8 billion, respectively, registering a deficit of
SAR180.2 in 2016.
Gauging the macroeconomic risks through the debt level, adequacy of reserves and finan-
cial stability reveals that Saudi is well poised to encounter possible future shocks.
Highlights and NCB Views
Saudi Arabia’s
2017 Budget Report
Timely, Targeted and Expansionary Fiscal Policy
Said A. Al Shaikh
Chief Economist | s.alshaikh@alahli.com
Authors
Tamer El Zayat
Senior Economist/Editor | [email protected]
Majed A. Al-Ghalib
Senior Economist | [email protected]
Macroeconomic and
Fiscal Performance in
2016
Fiscal Budget Outlook in
2017: Timely, Targeted
and Expansionary Fiscal
Policy
Towards a Balanced
Budget
Concluding Remarks
Contents
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IV
-2%
0%
2%
4%
6%
8%
10%
12%
2011 2012 2013 2014 2015 2016P 2017F
Oil Non-oil Public Non-oil Private Real GDP