Global investment bank JPMorgan Chase projected Saudi Arabia's fiscal deficit to narrow from 8.9% of GDP in 2017 to 3.7% of GDP in 2018 based on its Brent oil price assumption of $69.5 p/b this year, which is well below the government's deficit target of 7% of GDP. It indicated that the Kingdom's fiscal deficit narrowed significantly from SAR46.5bn or 7.5% of GDP in the second quarter of 2017, to SAR7.4bn or 1% of GDP in the second quarter of 2018, on the back of higher oil receipts. However, it said that the non-oil fiscal deficit widened from 33% of non-hydrocarbon GDP in the second quarter of 2017 to 40% of non-oil GDP in the second quarter of 2018, despite the introduction of the value-added tax and other fees. It added that authorities have raised about $26bn in financing so far this year, including a $6bn syndicated loan, $11bn in external debt issuance and about $9bn in domestic issues. But it noted that higher-than-anticipated expenditures would constitute risks to the fiscal outlook amid subdued economic activity. 

In parallel, the investment bank forecast Saudi Arabia's public debt level at 18.5% of GDP at end-2018, relative to 17.2% of GDP at end-2017. It said that authorities have planned to finance 40% of the 2018 budget deficit through drawing down foreign currency reserves at the Saudi Arabia Monetary Authority (SAMA). However, it noted that authorities have changed their strategy due to reduced financing requirements, and that they no longer intend to tap foreign currency reserves this year. As such, it attributed the decline in the current account and reserve account at SAMA to transfers to other entities such as the Public Investment Fund. Overall, it forecast foreign currency reserves at SAMA to rise from $496bn at the end of 2017 to $508bn at end-2018, due to reduced fiscal pressures. 
Source: JPMorgan Chase