Saudi Arabia’s Q1 2021 budget deficit shows structural improvement, says Moody’s

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Saudi Arabia’s budget deficit for the first quarter of 2021 showed structural improvement, as non-oil deficit fell to over six-year low, Moody’s Investors Service said.

While much of the decline in the budget deficit was a result of higher oil prices and a seasonal decline in spending, structural factors such as higher VAT and lower capital spending were also responsible. 

The structural improvement reduces the fiscal exposure to fluctuations in global oil demand and prices,” Moody’s added. 

“If sustained, it will also help reverse part of the fiscal deterioration that took place last year as a result of the coronavirus shock and arrest a further significant deterioration in the government’s balance sheet,” the rating agency added.

Moody’s expects Saudi Arabia’s non-oil economy to grow about 3.4% this year after contracting 2.3% in 2020.

Earlier this month, Saudi Arabia’s Ministry of Finance announced the Q1 2021 budget. Total revenue stood at SAR 204.8 billion, while total expenditures reached SAR 212.2 billion in the first quarter of 2021.