Saudi to boost capex in H2 as govt launches new projects: SICO

Saudi Arabia is expected to boost its capital expenditure in H2 2018 after underspending on capex in the first six months of the year, SICO Investment Bank said in a new report.

The Kingdom's capex reached SAR 48 billion in Q2, bringing the total capex in H1 to SAR 74 billion, which is 36 percent of the total budgeted capex. However, the capex was 45 percent higher year-on-year (YoY) in Q2.

Of the SAR 11 billion sectoral expenditure in the second quarter, SAR 4 billion was spent on the infrastructure and transportation sector, the report added. 

"We expect to see elevated capex growth in H2 in general and related to the infrastructure in particular," the bank said, referring to recently announced SAR 755.8 million worth of projects in the health, education and hospitality sector and a host of ongoing investment projects that have not been officially announced.

Meanwhile, the Kingdom's budget deficit narrowed to SAR 7 billion in Q2, compared to SAR 35 billion in Q1, owing to high oil revenues, SICO noted.

Oil revenues surged 82 percent YoY and 62 percent quarter-on-quarter (QoQ) to SAR 184 billion in Q2 2018, supported by higher oil prices and quarterly dividends not accounted for in Q1.

Saudi Arabia achieved 61 percent of its projected oil revenues for 2018, with an aggregate oil revenue of SAR 298 billion for H1.

Non-oil revenues jumped 71 percent QoQ to SAR 89 billion in Q2, driven by a 61 percent quarterly increase in tax income and an 86 percent rise in other revenues mainly from Saudi Arabian Monetary Authority (SAMA) and Public Investment Fund (PIF). The combined revenue of the two entities reached SAR 38 billion.

According to SICO, taxes on goods and services (including excise taxes and VAT) generated SAR 30 billion in revenues in Q2, 31 percent higher than the previous quarter. Overall, tax revenue reached SAR 48 billion in Q2, and a total of SAR 80 billion in H1 2018.

Total expenditure reached SAR 281 billion in Q2, with the total expenditure for H1 reaching SAR 482 billion, 49 percent of total budgeted expenditure for 2018.

Current expenditure rose 33 percent QoQ to SAR 233 billion in Q2, driven mainly by higher compensation of employees, which amounted to SAR 131 billion.

Expenditure on social benefits reached SAR 25 billion in Q2 and a total of SAR 44 billion in H1. The spend was SAR 21 billion higher than social benefits paid in H1 2017, the report added.