Economic Research | Country Risk Weekly Bulletin | Country Risk Weekly Bulletin 569 | Saudi Arabia's non-hydrocarbon GDP growth projected at 2.3% in 2019 | Lebanon | Byblos Bank

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Byblos Bank

Country Risk Weekly Bulletin 569

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Saudi Arabia's non-hydrocarbon GDP growth projected at 2.3% in 2019

Bank of America Merrill Lynch (BofAML) expected Saudi Arabia's fiscal deficit to widen from $36bn, or 4.6% of GDP in 2018, to $61.5bn, or 7.7% of GDP in 2019, in case oil prices average $70 p/b during the year. It noted that the actual deficit in 2019 would miss the government's 2019 budget target of a deficit of $34.9bn, or 4.2% of GDP, as it considered that budgeted oil and non-oil revenues are difficult to reach. It said that budgeted oil revenues for 2019 are consistent with an average oil price of $80 p/b and oil production of 10.2 million b/d, without any changes in domestic energy prices. Also, it did not expect the government's decision to lower the value-added tax registration threshold to add significant revenues, while it anticipated proceeds from expatriates' levies to fall short of targets. Further, it said that spending remains tight, with a focus on capital expenditures to support the non-oil economy, while it considered that the budgeted drop in the public-sector wage bill is unlikely to materialize. In addition, it projected the fiscal breakeven oil price at $93.6 p/b in 2019, up by $8 p/b from 2018 and by $13 p/b from 2017. It said that the gradual and sticky increase in the fiscal breakeven oil price, along with the relative erosion of fiscal buffers since 2014, exposes the economy to a sustained drop in oil prices.

Further, BofAML expected the Kingdom's external financing needs at between $22bn and $33bn in 2019, in case oil prices average $70 p/b, which it plans to raise through bond and sukuk issuances, as well as through loans. It projected the country's external borrowing needs to increase to between $30bn and $46bn in 2019, in case oil prices averaged $60 p/b, as the fiscal deficit would reach 11% of GDP in this case. 

In parallel, BofAML projected real GDP growth at 1.6% in 2019, compared to the government's forecast of 2.6%, and anticipated non-hydrocarbon real GDP growth at 2.3% this year, unchanged from the preceding year.
Source: Bank of America Merrill Lynch
 
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