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Saudi Assets will Increase Over $40 Billion This Year


Saudi Arabia : 13 November 2010

Gain is due to climbing oil exports and a solid fiscal position

Saudi Arabian assets are expected to rise by over $40 billion by the close of this year thanks to strengthening oil prices.  This move will boost the kingdom into a surplus position, according to a leading Saudi investment firm.

Saudi Arabia lost about $28 billion last year due to low earnings in hydrocarbon exports.  In 2010 net foreign assets for SAMA (Saudi Arabian Monetary Agency) are expected to rise substantially by Dh41.3 billion, reaching $515.5 billion by the end of this year, according to Jadwa Investments of Riyadh.

These reserves are expected to continue accumulating, reaching record highs of about $544.6 billion by the end of next year, as the global oil superpower collects higher earnings from sales of crude based on boosts in prices and rising production.

The reserves in SAMA reported the largest increase at the close of 2008, a jump of almost $143 billion in only twelve months as the kingdom enjoyed a fiscal surplus amount of SR 581 billion, the highest on record.

Oil prices reached $95 per barrel on average throughout that year and helped to create the massive surplus as Riyadh produced nearly 9.2 million barrels of oil per day.

In 2009 the output decreased to around 8.1 million bpd.  Now Jadwa expects to see that figure rise to 8.2 million, thanks to Saudi’s decision lining up with OPEC agreements that occurred near the end of 2008.  Trimming production is expected to reverse a drop in price that was seen in oil after the global crisis.

Oil output in Saudi is forecasted to rise even further next year, as Jadwa expects production to hit 8.4 million bpd on the backs on the worldwide economic recovery.

The price of Saudi crude is expected to rise from the 2009 figure of $60.5 per barrel to an average of $71.3 per barrel for 2010 and $74.8 per barrel in 2011.

Those gains in the oil earnings will push the Kingdom’s surplus to about SR 22 billion for this year, a sizable increase from the SR 87 billion deficit seen in 2009.  Further increases in the price of oil could cause the surplus in the nation to land at about SR 42 billion.  Saudi Arabia controls more than 20 per cent of the global proven oil deposits.

Reports put the earnings on oil exports for Saudi Arabia at almost $191.1 billion for 2010, which is up 17 per cent from the $163.1 billion in earnings recorded in 2009.  Although earnings are forecasted to climb even higher, reaching $197.1 billion for next year, they are still a far cry from the $281 billion earned in 2008.

Even though actual spending on expenditures was recorded at SR 604 billion, well above the SR 540 billion forecasted, the budget numbers should still return a surplus.

Actual revenue will jump from SR 470 billion forecasted to SR 625 billion according to the report.  Official fiscal balance figures stated a SR 70 billion deficit as compared to the SR 87 billion shortfall last year, which was the first negative balance Saudi has seen fiscally since 2002.

These strong fiscal numbers will likely decrease the public debt of the kingdom from SR 237 billion in 2009 to SR 220 billion by the close of 2010 and a further drop to SR 205 billion by the end of next year.  These plans would see the debt ratio of Saudi decline from 2009, when it sat at 16 per cent of the GDP, to 13.7 per cent this year and only 11.8 per cent next year.  This would be a record low not seen in over 15 years.

The domestic debt of the Kingdom is a result of heavy borrowing practices seen in the 90’s when lower oil prices created budgetary shortfalls.  The debt surpassed the country’s GDP late that decade and has been rapidly decreasing in the booming years since then.

Reported at SR 660 billion at the close of 2003, Saudi Arabian debt declined in 2004 to land at SR 614 billion and fell further in 2005 to reach SR 475 billion.  Maintaining the rapidly decreasing pace, the debt reached SR 267 billion in 2007 and SR 237 billion by the close of 2008.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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