OPEC heavyweight Saudi Arabia will boast a small budget surplus in 2001 despite a slump in oil prices as a result of a world economic slowdown and the terror attacks in the United States, an economic report forecast Wednesday, October 31.
The kingdom, which depends on oil for more than 80 percent of its income, has projected a balanced budget for the current fiscal year at 215 billion riyals ($57.3 billion).
But the economic report of National Commercial Bank (NCB), a leading Saudi bank, predicted a 16.2-billion-riyal ($4.3-billion) surplus and a three percent nominal growth in the Gross Domestic Product (GDP) to $178.4 billion. The projected surplus is about one third of last year's 45 billion riyals ($12 billion).
The report, prepared by the bank's chief economist Said Al-Shaikh, bases its estimates on an average oil production of 8.1 million barrels per day (bpd) and total oil revenues of 186 billion riyals ($50 billion).
This represents a 16.3 percent fall in oil revenues over last year. The report expected government expenditure to remain restrained this year at the projected $57.3 billion, while revenues will reach 231.2 billion riyals ($61.6 billion).
The current account is expected to record a surplus of $5.2 billion on the back of a $28.8-billion trade surplus, it said. Several independent Saudi reports and economists have predicted that due to a sharp drop in oil prices, the Saudi budget in 2001 will either break even or have a small shortfall. Riyadh's OPEC oil production quota stands at 7.541 million bpd, but was well above eight million for most of the first six months of the year.
"For the remainder of this year, oil prices are expected to remain at, or slightly below, OPEC's lower band limit of $22 a barrel, with an allowance for occasional spikes," the NCB report said. "As a result, OPEC's basket price is forecast to average about $23 a barrel for the whole year ($25 for Brent)." But the NCB report drew a different picture for the Saudi economy next year due to a combination of factors.
"We anticipate the recent events (US attacks) to have a dampening effect on economic growth in the kingdom next year," said the report, adding that oil output and price will most likely be lower.
Government expenditure next year is expected to rise by 1.4 percent to $58.1 billion, leaving a budget deficit of just $1.9 billion. The report predicted that in 2002, the GDP will grow by just 1.4 percent to $180.8 billion, and oil revenues will drop by 11.7 percent to $43.8 billion. — (AFP, Riyadh)
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com )