Publications
Partners
Dubai - Plunging oil prices could mean the first budget cuts for major exporter Saudi Arabia since 2002 but they are not expected to be large enough to stop growth in the Arab world's biggest economy.
The government gets about 90% of its revenue from oil exports and is believed to need an average oil price above $90 to balance its budget this year.
Bigger budget
But Brent crude fell to $67 a barrel this week from $115 in June and if current prices are sustained, the budget plan for next year, expected late this month, will produce a deficit for the first time since 2009.
"There is no way for Saudi authorities to announce a bigger budget in 2015 than what they announced for 2014," said John Sfakianakis, a former adviser to the Saudi finance ministry who is now regional director of asset manager Ashmore in Riyadh.
"Unavoidably they will have to scale down the budget. (But) I do not expect the budget to be hugely lower."
As recently as last month, the International Monetary Fund predicted Saudi Arabia would enjoy a fiscal surplus of 1.6% of gross domestic product in 2015; now, private economists are talking of a deficit of over 1%.
Rail system
But businessmen and economists do not expect big cuts in state spending because the government has built huge fiscal reserves to cover any deficit and its ultra-low debt levels would allow it to borrow easily if needed.
This means the economy, which grew an annual 3.8% in the second quarter, should continue to expand and major infrastructure projects, such as the $22.5bn plan to build a metro rail system in Riyadh by 2019, should not be at risk.
