The world’s biggest exporter of crude oil, Saudi Arabia, has just reported a budget surplus, the first time it has done so in nearly 10 years thanks to high oil prices boosting its coffers.
According to the kingdom’s finance ministry, releasing what it said were preliminary estimates, the country’s 2022 surplus clocked in at 102 billion riyals ($27 billion), good for 2.6% of its gross domestic product (GDP). Total revenue for this year was estimated at 1.234 trillion riyals, while spending amounted to 1.132 trillion riyals.
The Saudi government approved a 1.114 trillion riyal budget for 2023 and expects to still record a surplus of 16 billion riyals for the year. Although that will mark a significant reduction from this year’s surplus, amounting to just 0.4% of GDP, it’s a surplus nonetheless and is based on an oil price considerably lower than what many experts have projected for 2023.
Two years ago at the height of the oil crisis, Gulf nations led by Saudi Arabia put on a brave face and touted the strength of their economies claiming they could withstand any scale of shocks brought on by low oil prices. However, Saudi Arabia went ahead and tripled its value-added tax, announced spending cuts in non-priority areas and suspended the cost of living allowance despite denying it was running in austerity mode.
With oil prices stuck around $40/barrel, GCC countries were in for a very bumpy ride. Indeed, S&P Global Ratings estimated that GCC central government deficits would hit nearly half a trillion dollars cumulatively between 2020 and 2023 while government debt would surge by a record-high $100 billion in 2020 alone.
But alas, those bearish projections were not to be. In a fairy-tale turnaround that few could have foretold, oil prices have soared to multi-decade highs, largely aided by strong post-Covid demand as well as Russia’s war in Ukraine.
The petrodollar windfall has really given a boost to battered Gulf economies, allowing some Gulf Arab states to pay down debt and others to diversify their oil-reliant economies in very big ways.
According to Reuters, all the six Gulf Arab states–Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Bahrain and Oman–are on track to post budget surpluses, many for the first time in a decade thanks to buoyant oil prices and years of fiscal reforms.