Saudi Arabia's second-quarter budget deficit shrank by nearly three-quarters, as a jump in oil revenue offset a war-driven drop in crude output. Higher prices are covering fewer barrels, narrowing the shortfall even as the Kingdom's oil sector and broader economy contract.
Saudi Arabia's second-quarter shortfall fell to 34.3 billion riyals, or $9.1 billion, down from 125.7 billion riyals in the first quarter, the finance ministry said. The same war that hit the Kingdom's oil industry also pushed the economy into its steepest contraction since the pandemic.
Oil revenue rose 28% from the previous quarter as crude prices jumped, while spending fell 3.5%. Meanwhile, the oil sector contracted almost 25% during the quarter after Iranian attacks and the closure of the Strait of Hormuz disrupted exports, dragging the broader economy down with it.
Riyadh still found ways to move barrels. It rerouted crude oil through pipelines to the Red Sea port of Yanbu, collecting sharply higher prices on reduced volumes. Separately, Brent was trading near $90 per barrel on Thursday, up more than 47% this year.
Even so, EFG Hermes estimates Saudi Arabia now needs oil near $115 per barrel to cover spending, up from about $96 last year. Riyadh spent heavily in the war's first weeks, and second-quarter expenditure was still 11% higher than the same quarter last year.
The Kingdom has already signaled that some Vision 2030 projects may be delayed, trimmed, or abandoned if the numbers stop making sense. Still, the IMF expects higher prices to more than offset lower export volumes, narrowing the deficit to 3.7% of GDP this year and 3.1% in 2027.
Source: Commodities Analysis & Opinion
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