Saudi Arabia's budget and external surpluses are expected to reach a new record level in 2012 due to high level of average daily production in three decades and a record level of average crude prices for the year. Budget surplus is expected to reach SR 493 billion in 2012 with total revenue of SR 1.24 trillion and spending of SR 746 billion, according to a report by Al-Rajhi Capital.
It expects the surplus to shrink to SR 220 billion in 2013. However, surplus is expected to rise slightly to SR 232 billion in 2014. Trade balance is expected to reach SR 944 billion (40 percent of GDP) in 2012 which will decline to SR 669 billion (28 percent of GDP) in 2013. However, it is expected to remain flat in 2014 at SR 678 billion (27 percent of GDP). Similar trend is expected in current account balance as it will peak in 2012 at SR 609 billion (26 percent of GDP) to decline to SR 329 billion (14 percent of GDP) in 2013 and SR 328 billion (13 percent of GDP) in 2014.
The report said crude production has been rising in Saudi Arabia since global recovery started in the middle of 2009. The average daily production was 8.3 mbd in 2010 which jumped up to 9.3 mbd in 2011 due to supply disruptions in Libya and other smaller oil producing countries. Average daily crude production in Saudi Arabia in the first 10 months of this year has been 9.8 million barrel per day as reported by Organization of Petroleum Exporting Countries (OPEC). The average production in January-October period is 6 percent higher compared to the daily average production in 2011. However, the production has been easing after peaking in June when it crossed 10 mbd. The latest data available from OPEC shows that the average daily production was 9.7 million barrel in October. According to Al-Rajhi Capital, the average daily production to be around 9.7 million barrel in 2012.
The average crude prices in 2012 have been flat compared to average price in 2011. Average Brent price this year has been $112.1 per barrel compared to $111.3 per barrel last year. Average WTI Nymex crude price has been similar at around $ 95 per barrel in 2011-12. The average Arab Light prices have been $ 110.5 per barrel in 2012 – close to the bank's forecast of $ 112 per barrel in April this year.
Nominal GDP Growth
The nominal GDP growth in the first two quarters of the current year was robust though it showed moderating trend as expected due to flattening trend in crude production and prices. The nominal GDP grew by 16.9 percent y-o-y and 6.8 percent y-o-y in Q1 and Q2 of 2012 respectively. The moderation was witnessed primarily due to sharp deceleration in oil sector which grew by 25.3 percent in Q1 but only 7.3 percent in Q2, the report said.
Nonoil sector remains resilient as growth in the sector was 6.7 percent in Q1 and 5.9 percent in Q2 of 2012 due to robust growth in the nonoil private sector. Nonoil private sector grew 10.6 percent and 11.1 percent in Q1 and Q2 respectively as against nonoil government sector growth of 0.2 percent and -1.8 percent during these two quarters.
Al-Rajhi Capital expects nominal GDP to reach SR 2.35 trillion in 2012, an 8.8 percent growth from the last year. However, nominal GDP is expected to be flat next year which will rebound to SR 2.53 trillion in 2014. For real GDP, growth is expected to be 4.9 percent this year and a slow down to 3.3 percent in 2013. However, the growth is expected to be rebound to 4.5 percent in 2014.
Inflation has been declining from 5.4 percent in February this year and bottomed at 3.6 percent in September. It turned around in October to 3.8 percent. The average monthly inflation for the first 10 months of 2012 is 4.7 percent. Al-Rajhi Capital expects inflation to moderate further to around 4.2 percent in 2013 mainly on account of moderating rent inflation and modest food inflation.