As per the prediction done by the Ratings Agency Moody’s, the Kingdom of Saudi Arabia’s Non-Oil or Private Sector progression will bounce back to 3.4% within this year in 2021, and comparatively to a rarest 2.3 percent decline, it faced within the year 2020.
The Ratings agency Moody’s report which had earlier stated the previous year’s declining trend, that was triggered and was rendered inevitable due to the COVID-19 Pandemic, that had in fact, rendered majority of the global economies helpless, and disrupted in the formation-up of non-oil progress momentum apparent during 2019 as an outcome of the structural reforms and roughly initial evolution in implementing broadening projects.
The preceding week, the International Monetary Fund, stated out and divulged that the Arab League’s major economy is all poised or expectant to progress at 2.1 percent this year, post witnessing out a plummeting of 4.1 percent within 2020 all due to the rising Pandemic concerns as well as the declining as witnessed out in the Oil rates.
The estimate figure is not as good as than a 2.9 percent real GDP progress estimate the IMF published in April due to a downhill revision of Saudi oil GDP, now anticipated to decline further by 0.5 percent this year, against a prior 1.6 percent growth evaluation.
Moody’s stated out that the Kingdom of Saudi Arabia’s public finances persist to be highly sensitive to oil budget fluctuations as oil revenues remain to account for more than a half of total revenues, although this is plummeted from an average of more than 70 percent in 2014-18.
Moody’s the Rating Agency was further prompt to state that; “A seasonal drop in spending, which tends to be the highest in the last quarter of the year and the lowest in the first quarter of the year, also drove the fiscal improvement in the first quarter. Both of these factors have reduced the quarterly fiscal deficit to one of the lowest on record in the past six years, bested only by a $7 billion surplus in the first quarter of 2019, when the government received a large “special” dividend from the national oil company, Saudi Aramco.”
It also further elaborated and announced that; “The increase in the price of crude oil to an average of $61 per barrel in January-March quarter from $44.5 a barrel in October-December period last year has led to a significant increase in government oil revenue, which — despite a six per cent cut in average daily oil production — increased 21 per cent compared to the last quarter of 2020.”
Moody’s attributed this upgrading to the higher oil values and a huge seasonal declining in spending, and stated out that the budget performance figures also disclosed a structural enhancement evident in the weakening in the non-oil fiscal deficit to the bottom level in more than six years, a credit positive.
“The structural improvement was mainly a result of the tripling of the value added tax rate to 15 per cent last July and a nearly 50 per cent cut in capital expenditure so far this year, in line with the approved 2021 budget,” the ratings agency said.
Moody’s also added out that the structural improvement diminishes the fiscal exposure to instabilities in global oil demand and budgets. “If sustained, it will also help reverse part of the fiscal deterioration that took place last year as a result of the coronavirus shock and arrest a further significant deterioration in the government’s balance sheet,” it said.
Saudi Arabia announced a noteworthy narrowing of the regime’s budget deficit to $2 billion, or 0.3 per cent of full-year GDP, in the initial quarter of this year from $29 billion in the fourth quarter and $9 billion in the initial quarter of 2020.
The IMF further stated out that, “The VAT rate increase, the removal of the cost-of-living allowances, the increased focus on the efficiency of capital spending and planned further domestic energy price reforms are all important contributors to the planned fiscal adjustment and should not be reversed or delayed.”