Saudi Arabia is expected to maintain a high level of government spending next year but succeed in posting another large budget surplus without needing to dip into its fiscal reserves, a senior official of the International Monetary Fund (IMF) said. David Robinson, the IMF's mission chief for Saudi Arabia, told Reuters that the euro zone debt crisis had increased the threats to the global economy, which might have negative ramifications for the world's biggest oil exporter. “Key channels would be similar to those observed in 2008 and 2009. The trade channel, via a decline in hydrocarbon exports and prices, remains the most significant, but spillovers through financial linkages are also important,” he said. However, Saudi Arabia's near-term outlook remains strong because of this year's surge in oil revenues, which boosted the fiscal and external balances of the Arab world's largest economy, Robinson added. “Gulf Cooperation Council (GCC) countries are in a good position to undertake countercyclical policies and financial sector support measures to mitigate the impact of the crisis, if needed,” Robinson said in a written response to questions. The IMF has forecast a Saudi fiscal surplus of 9.4 percent of gross domestic product in 2011 and 8.0 percent in 2012. “At this stage, our estimates are that the level of government spending in riyal terms will be broadly similar in 2012 as the likely out-turn in 2011, but this will depend on the policy initiatives that the government may choose to introduce in the budget,” Robinson said. In its original budget for 2011, the government envisaged spending of SR580 billion ($155 billion). “At current oil prices we would expect to see another fiscal surplus, about 8 percent of GDP, with no need for a drawdown in fiscal reserves,” Robinson said of next year's outlook. “Our estimates suggest that the break-even oil price for 2012 would be of a similar order of magnitude as in 2011, that is about $80 a barrel - this is the Arab Light price,” he said, referring to minimum oil price at which the country can balance its budget. In its October regional economic outlook, the IMF projected Saudi Arabia's GDP would grow 6.5 percent this year, slowing to 3.6 percent in 2012. Inflation in Saudi Arabia hovered below 5 percent for most of 2011 but reached an eight-month high of 5.3 percent in September. In October, it fell back marginally to 5.2 percent and stayed at that rate in November. “Global food prices have eased a little in recent months and current futures prices do not suggest major new pressures on the horizon,” Robinson said. “The level of domestic demand is the key question and this component has increased in recent months. “This should continue to be monitored carefully and, if warranted, policymakers could use a combination of fiscal and monetary policies to ease pressures.” In its latest regional outlook, the IMF forecast annual inflation of 5.4 percent in 2011 and 5.3 percent in 2012. Robinson also said he expected further development of the Saudi Arabian stock market.
