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Saudi Arabia set to announce budget for 2022, deficit likely to be narrowed down

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Saudi Arabia is expected to announce its budget for 2022 and the actual budget figures for the current year 2021 on Sunday, with experts predicting the Kingdom’s budget deficit likely to be narrowed down to 52 billion riyals ($13.8 billion) in 2022 as compared to 85 billion riyals in 2021.

Positive expectations prevail regarding Saudi Arabia’s expected and actual budget figures given the improvement in oil prices and the expected tail end of roadblocks related to the outbreak of the coronavirus globally which has been positively reflected on the recent uptick in demand for oil and the movement of trade and markets.

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Financial experts who spoke to Al Arabiya predicted that Saudi Arabia is heading to record its lowest fiscal deficit in eight years in the 2021 budget, as the budget deficit is expected to decrease this year to 85 billion riyals.

Experts said the expected announcement of the lowest fiscal deficit in eight years is mainly thanks to the rise in oil prices from the levels of 2020, which witnessed prices at the level of $16/barrel in April 2020.

In November, Ratings agency Moody's changed Saudi Arabia's outlook to “stable” from “negative”, saying it was likely the government would reverse most of its 2020 debt increase while preserving fiscal buffers.

In an interview with Al Arabiya, Head of Research at Al-Rajhi Capital Mazen Al-Sudairi said he expected the deficit to decline to 85 billion riyals in 2021, compared to an expected deficit of about 141 billion riyals, given that spending did not exceed 1.15 trillion riyals during the year.

Al-Sudairi said he expected oil income to rise to 545 billion riyals in 2021, and to reach 600 billion riyals in 2022, and non-oil income to reach 380 billion riyals, and the budget will achieve a surplus of 25 billion riyals in 2022, compared to an estimated deficit.

He explained that these expectations come despite the reservations in expectations regarding oil production with an average of 9.6 million barrels per day in 2022, while there are optimistic expectations at 10.7 million barrels per day, and despite the fluctuation in asset prices and fears so far from the COVID-19 Omicron variant, adding that he expects that the price of a barrel will be oil could reach $72 in 2022.

The largest Arab economy recorded a budget surplus of 6.7 billion riyals ($1.79 billion) in the third quarter this year, as higher oil prices fueled its first quarterly surplus since 2019.

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