Kuwait Reports Double Budgeted Income Due to Oil
Revenues in Kuwait are double the forecasted figures for 2011-12 in only 11 months, due to rising oil prices and increasing outputs, according to official data.
Kuwait’s income reached record highs of $96.8bn at the close of February, a massive increase over the yearly expectations of $48.4bn, based on data posted by the finance ministry.
The 44.1 percent revenue surge over the past year has resulted from rising oil prices and a marked output increase, moving from 2.3mn barrels per day (or bpd) last year to 3.0mn bpd.
Oil revenues represent 95 percent of government income and hit $91.7bn during the opening 11 months of this year, representing a 45.8 percent increase from last year.
Budgeted oil revenues were calculated using a conservative $60 per barrel price. Actual results saw the average oil price reach $109 per barrel over the last 11 months.
Spending over that period amounted to nearly half of the budgeted amount. Ministry figures reported $38.9 billion in expenditures over the 11-month period, significantly lower than the budgeted amount of $70 billion.
These figures result in a $57.9 billion provisional budgeted surplus, twice the amount of last year’s surplus. Kuwait has posted a surplus for thirteen straight years, accumulating over $200 billion in surplus funds over the last twelve years.
The current figures are record high for Kuwait, both in terms of budget surplus and actual revenue.
The record high income of Kuwait previously sat at $79 billion, earned during the 2010-11 fiscal year. The highest budget surplus for the Gulf state was recorded in 2007-08 at $33.5 billion.
Recent forecasts from the National Bank of Kuwait indicate that actual budgeted figures at the close of this fiscal year will drop to about $43 billion as a result of year-end accounting adjustments.
Kuwaiti law dictates that ten percent of the yearly government income be moved into Kuwait’s sovereign wealth fund. The budget does not include any returns for that fund.
Businesses in Saudi Remain Stable in a Resilient Economy
The National Commercial Bank (or NCB) stated that Saudi businesses will remain stable during the second quarter of this year, as the sector continues to be resilient. NCB launched the 2012 Q2 Business Optimism Index, in association with D&B South Asia Middle East.
This quarterly index indicated positive conditions for the Kingdom’s business sector, in spite of a continuing stalemate in the region’s geopolitical climate and little changes in the European debt crisis.
NCB’s Senior VP and Group Chief Economist Dr. Said Al-Shaikh noted that the healthy conditions in Saudi Arabia’s economy resulted from three factors.
First of all, the Kingdom’s government committed to boost capital expenditures in order to offset the negative impact of a weaker global economy. Dr. Al-Shaikh stated that contracts worth around SR270 billion were handed out to public and private firms by the Saudi government last year, in an effort to encourage domestic growth.
Also, Saudi Arabia has reported massive surpluses, especially significant when compared to the global financial status. These reserves indicate the government’s ability to fund various projects and generate growth. The Kingdom’s foreign assets total SR2.3 trillion to date, according to Al-Shaikh.
The final factor involves the dissipation of that heightened state of fear in reaction to financial worries. Al-Shaikh noted that the predisposition to immediately offset negative impacts has faded, allowing shocks and worries to be absorbed into the economy. Negative conditions have occurred in the past and are sure to happen again, said Dr. Al-Shaikh.
Undaunted by financial problems in other leading economies, Saudi Arabia’s government remained on track for capital expenditures, resulting in stimulated growth. Although geopolitical tensions continued across the region, these conditions resulted in rising oil production and oil prices, with government revenue surging. This was indicated in the hydrocarbon sector’s BOI for the second quarter.
The non-hydrocarbon sector’s BOI for the second quarter was also stable, resulting from positive conditions in the oil sector and a steady commitment by the government to offset uncertainties in the global economy. Only minor alterations were seen from last quarter to the current quarter.
In confirmation, Al-Shaikh noted that 33 percent of survey respondents stated they are not anticipating negative impacts in the second quarter of 2012, compared to 31 percent of respondents making this claim in the opening quarter.
NCB’s BOI report revealed an optimistic hydrocarbon sector in Saudi Arabia, with improved conditions in the second quarter of 2012. Overall the sector recorded a composite score of 43, three points more than the first quarter score, resulting from increased BOI scores across the three parameters. In regards to the parameter covering the level of selling prices, 53 percent of survey respondents anticipate further increases, 37 percent expect prices to continue at the current levels for Q2 and ten percent expect to see prices decline in the period.
The composite index remained steady, according to the BOI, with consumers and businesses reassured by the Kingdom’s committed economic support in spite of weaker global financial conditions. Each of the six parameters indicates a sideways momentum in index value throughout the second quarter, with only marginal decreases and increases.
The volume of sales registered a score of 67, up from 66 in the first quarter, with the new orders score coming in at 65, down from 67 in the opening quarter. The level of selling prices stood at 24 points for the second quarter, declining from 27 in Q1.
Inflation in Saudi Arabia was recorded at 5.4 percent for February. Inflationary pressures are expected to remain stable or decline slightly, resulting from a drop in world food prices and a stable domestic market.Paul Holdsworth, Staff Writer, Gulf Jobs Market News