Despite fluctuating oil prices and the possibility of lower energy consumption globally amid economic slowdown, Saudi Arabia says it now expects a budget surplus of $4.3 billion (16 billion riyals) in 2023.
The latest forecast boosts next year’s budget surplus by around 100 percent compared with projections made just three months ago.
In this connection, Riyadh released its latest fiscal outlook, which shows that the revenues are now set to reach 1.13 trillion riyals, slightly more than projected earlier.
However, expenditure next year is expected at 1.114 trillion riyals, unchanged from the government’s estimate published in September.
Meanwhile, the budget is in surplus for the first time in nearly a decade, and the government wants to keep it in the black in the coming years. That follows several years of painful measures that included reductions in subsidies, alongside more taxes and levies to combat a sharp fall in oil revenue that dented the economy.
“We are not celebrating the surplus,” Finance Minister Mohammed Al Jadaan told reporters. “It’s something that we expected, we’ve been working to curtail our spending and to increase our non-oil revenues.”
The world’s top crude exporter is standing by most of its forecasts even as the oil market is close to wiping out its gains for the year. The threat of a recession also looms large because soaring energy costs and interest rates could stymie demand in the coming months.
The kingdom tends to take a relatively conservative view of crude prices in drawing up its budget and doesn’t divulge its assumptions.
But the oil market could look quite different by early 2023, with several potentially historic shifts in supply and demand unfolding in the coming days and weeks.
Surplus projections for next year are likely conservative, Al Jadaan said. International travel returning to pre-Covid levels could add up to 2 million barrels a day of additional oil demand, while the reopening of China’s economy may increase that by a further 500,000 to 1 million barrels a day, he said.
“Just these two factors alone would cause some problems to the international energy market because spare capacity is actually very limited.”
Buoyed by the rebound from the global pandemic as well as loosening restrictions on investment and social activities, the kingdom is set to be the fastest-growing economy in the Group of 20 this year with an expansion the government now anticipates will reach 8.5 percent.
The boom has spread beyond the energy sector. Business activity in Saudi Arabia’s non-oil economy expanded at the fastest pace in more than seven years in November, as new order growth accelerated and businesses turned more optimistic.
However, the latest budget projections signal the Saudi government won’t open the taps on spending. It’s also reluctant to reverse a pandemic era tripling of the Value Added Tax rate to 15 percent. The move helped shore up government finances when oil prices slumped in 2020, and officials said it would be reviewed in the future.
“The last thing we want is to change policies in haste,” said Al-Jadaan. “Just having one year of surplus or two years and then pushing to change policies is, I think, premature.”