JEDDAH – Saudi Arabia's expansionary budget for 2013 will help drive “healthy growth” in the Middle East's largest economy, Fitch Ratings said in its new report Saturday. The rating agency said the budget, based on a conservative oil price, would further strengthen the sovereign's net creditor position. However, it added that overall growth would slow due to a decline in oil production that was already evident in recent months. The 2013 budget projects record spending of $219 billion - 34 percent of GDP, up by almost 20 percent on the 2012 budget. Education and healthcare remain the focus of spending, accounting for 37 percent of the total. An 18 percent jump in revenues is projected. With no new revenue-raising measures announced and little scope for higher oil revenues, Fitch said the revenue projection appeared less cautious than usual. “However, actual revenues generally substantially exceed budget revenues (by an average of 82 percent over the past five years) and should do so again in 2013,” Fitch added. A $2.4 billion surplus is budgeted for 2013, but Fitch said it expects a larger surplus as the budget is consistent with an oil price of around $60 per barrel and production of 9.7 million barrels per day, compared with Fitch's forecast of an average $100 per barrel. Spending is also expected to surpass the budgeted level as actual spending has exceeded budget by an average of 24 percent over the past decade, the rating agency said. It added that although the fiscal position is exceptionally strong, it is heavily dependent on oil revenues. Fitch said it projects that the breakeven oil price will rise to $74 per barrel in 2013 (assuming oil production of 9.7 million barrels a day), up from $68 in 2012 and just over $40 in 2008. Fitch added: “Government spending has been the main impetus behind the strength of the private sector (construction was the fastest growing sector in 2012) and with policy remaining expansionary in 2013, further healthy private sector growth is anticipated. “Bank lending and strong consumer and corporate confidence should also support the private sector. Overall growth will slow, however, due to a decline in oil production that was already evident in recent months.” — SG/Agencies
