Saudi Arabia’s lower H1 deficit ‘credit positive’, says Moody’s

A 51 percent drop year-on-year (YoY) in Saudi Arabia’s fiscal deficit to SAR 72.73 billion in the first half of 2017 is “credit positive” for the Kingdom, Moody's Investors Service said in a recent report.

The deficit cut is largely attributed to a sharp increase in oil revenues from higher oil prices, despite the government’s wide-ranging economic and fiscal reforms to reduce its dependence on oil revenue.

The first half deficit accounts for just 37 percent of the SAR 198 billion deficit estimated in the Saudi budget for 2017.

“Full-year fiscal consolidation will remain contingent on oil price stability in the second half of the year, given the modest progress at increasing non-oil revenues,” the rating agency added.

Accordingly, the Kingdom may face challenges to achieve its oil revenue target of SAR 480 billion even amid stable prices and output levels.

“Given the weak performance so far, and no additional major reforms planned ahead of the introduction in 2018 of value-added tax, we think that non-oil revenues are likely to be slightly lower than the SAR 212 billion budget target” Moody’s analysts added.

The Kingdom’s fiscal deficit dropped to SAR 46.5 billion in Q2 2017, from last year’s SAR 58 billion, Argaam earlier reported.

The second-quarter revenue grew by 6 percent YoY to SAR 163.9 billion. Total spending for the same period slipped 1 percent YoY to SAR 210.4 billion.