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Saudis to expect oil revenue rising 80% by 2023
[RIYADH] Saudi Arabia expects oil revenue to jump about 80 per cent by 2023 to help the kingdom record its first budget surplus in a decade, according to people with knowledge of the matter.
Under a six-year program to balance the budget, officials predict rising oil prices and output will push income from oil sales to 801.4 billion riyals (S$287.1 billion) from 440 billion riyals this year, the people said on condition of anonymity because they aren't authorized to share the data publicly. It assumes the price of oil will reach US$75 a barrel. Non-oil revenue, excluding income from the Public Investment Fund, would increase 32 per cent to 337 billion riyals, they said.
While Crown Prince Mohammed bin Salman's plan to transform the economy aims to reduce its reliance on oil in the long term, higher crude prices are central to efforts to support growth while introducing measures that would help boost revenue from other sources. The kingdom has led a drive among major non-Opec members to stabilize oil markets through production cuts that have helped Brent crude prices exceed US$60 a barrel.
The oil revenue forecast "looks challenging given the development in the shale industry," said Monica Malik, chief economist at Abu Dhabi Commercial Bank. "The strong oil revenue growth in 2017 will be difficult to repeat." Authorities expect oil production to increase from an average of 10 million barrels a day this year to 11.03 million barrels in 2023. For 2020, they predict output of 10.45 million barrels a day, generating 605 billion riyals in revenue, the people said.
The Ministry of Finance declined to comment.
The scenario may signal that the world's biggest oil exporter doesn't currently see a need to extend the agreement to cut production beyond 2018 as a global supply glut eases.
Easing austerity "could prove premature if oil prices disappoint," Jean-Michel Saliba, an economist at BofA Merrill Lynch in London, wrote in a report last week. "Energy policy is likely to remain focused on supporting the oil market rebalancing and enabling the government's shift to boost growth near-term." Top Saudi officials last week rolled out an expansionary budget for 2018 to revive an economy battered by austerity and low oil prices. Gross domestic product contracted 0.5 per cent in 2017.
A document outlining some details of the fiscal program and published by the Saudi Press Agency showed authorities expected non-oil economic growth to stay above 3 percent through 2020 from 1.5 per cent this year. The document has since been deleted from the agency's website.