Saudi H1 revenue, deficit lower than estimates: Al Rajhi Capital

Saudi Arabia’s first-half revenue (SAR 164 billion) was 11 percent lower than the government’s initial target for the period, Al Rajhi Capital said in a Q2 Fiscal Update.

However, the Kingdom’s fiscal deficit for the first half at SAR 72.7 billion remains better than the initial target of SAR 99 billion, Al Rajhi added.

Full-year revenue and expenditure are likely to be lower than expected, based on the current run-rate achieved in the first half of the year.

“Only if average price of oil in 2H remains greater than USD50/barrel, could we expect an increase in revenue in the second half over the first, assuming similar non-oil revenue,” the brokerage firm added.

Oil prices should stand at average $61 per barrel (bbl) in H2 to meet the target oil revenue of SAR 480 billion in 2017.

During the second-half of the year, government spending could be higher, following the reinstatement of allowances for state employees. Expenditure is likely to remain higher in H2 if oil continues to trade at above $50 bbl.

Capital expenditure should improve in the second half but is likely to miss the Kingdom’s full year target.

“Due to this flexibility, we remain confident about the government meeting its fiscal target, but believe 2017 total capital expenditure may be lesser than initially estimated,” Al Rajhi added.

The Kingdom narrowed its Q2 budget deficit by 20 percent year-on-year to SAR 46.5 billion. Second-quarter revenue grew by 6 percent YoY to SAR 163.9 billion, while spending for the same period slipped 1 percent YoY to SAR 210.4 billion.