Goldman Sachs projected Saudi Arabia's fiscal deficit to narrow from 12% of GDP in 2020 to 6.4% of GDP in 2021, compared to the government's target deficit of 4.9% of GDP. It attributed the significant narrowing of the deficit to substantially higher revenues from the anticipated recovery in global oil prices, despite additional oil production cuts under the OPEC+ agreement. Also, it expected non-oil receipts to significantly rise from the hike last July in the value-added tax rate from 5% to 15%, and from the ongoing recovery in domestic activity. In addition, it anticipated public spending to remain flat this year, despite the additional outlays on coronavirus-related measures, in contrast to the government's target to reduce expenditures by 7% this year. However, it forecast public spending to decrease from 43% of GDP in 2020 to 36.7% of GDP in 2024, while it expected revenues to remain stable as a share of GDP. As such, it projected the fiscal deficit at 4.1% of GDP by 2024. It forecast the government's financing needs at about $65bn in 2021. It said that authorities plan to draw down fiscal reserves by $17.6bn in 2021 and to finance the remaining $47bn through domestic and external debt issuance. It added that, starting in 2022, the government plans to reduce its reliance on fiscal reserves and instead rely almost exclusively on debt markets. As a result, it forecast the public debt level to rise from 35% of GDP at the end of 2021 to 43% of GDP at the end of 2024, and to remain manageable.
Source: Goldman Sachs