Saudis predict $29 oil price in 2016

People in Saudi Arabia came out on social media to express their views on the budget and subsidy cuts.

Revenues in 2015 dropped to $162 billion, the lowest since the global financial crisis in 2009, due to a massive $123 billion fall in oil revenues.

“The result of the programme will be to increase energy efficiency, national economy and create many jobs”, he said.

Saudi Arabia on Monday unveiled a SR840 billion budget, launching a phase in which the Kingdom hopes to further diversify its revenues in an era of low oil prices.

Saudi Arabia, the de facto leader of the 12-member Opec oil cartel, has led the move to drown the world with excess supply, in an attempt to undercut higher-cost rivals such as United States shale oil producers.

The report stated that the kingdom’s current account experienced its first deficit since 1998 during the current year, which stood at Dollars 41.3 billion or 6.2 percent of GDP. Oil normally contributes the vast majority of public income. Non-oil revenue climbed 29 per cent to 163.5 billion riyals.

The 2016 budget projects revenues at $137 billion, the lowest in six years, and spending at $224 billion, slightly below 2015 projections of $229 billion.

So while Saudi Arabia might not be as accustomed to words like “austerity” and “budget cuts” as European nations, it has decades to get used to them.

Riyadh maintained high spending this year, and launched an expensive military intervention in Yemen, by tapping into the huge fiscal reserves it accumulated when oil prices were high.

The sharp increase was a surprise as the finance ministry said Monday that it would implement a “gradual” five-year program aimed at structural economic reform, including fuel price hikes, to improve energy efficiency. A brutal sell-off in commodity prices has taken its toll on the Gulf state, which has been dependent on oil for more than three-quarters of its revenues.

The spending cuts, rises in fuel, gas feedstock and electricity prices, and tax rises planned in the budget are expected to hurt sectors such as construction and petrochemicals, and slow economic growth next year.

The decisions will save the government about 16 billion riyals a year, Al Eqtisadiah newspaper reported, citing its own analysis.