We may earn commissions if you use the recommended services on this site.  

Saudi Arabia's Budget Deficit Swells to $9.5 Billion amid Declining Revenues

Latest Business News

Saudi Arabia's Third Quarter Budget Deficit Widens

Saudi Arabia's budget deficit for the third quarter expanded nearly sevenfold compared to the previous three months, as the world's largest crude exporter faced a decline in both energy and non-oil income. The government reported a shortfall of 35.8 billion riyals ($9.5 billion) for the quarter ending in September, according to a budget report from the Ministry of Finance. Expenditure decreased by 8% to approximately $78 billion, while revenues dropped by almost 18% to $69 billion, primarily due to lower oil and tax receipts. The quarterly deficit was more than double the size of the same period in 2022. Saudi Arabia's economy, valued at $1.1 trillion, experienced its largest contraction since 2020 during the third quarter. The kingdom reduced oil production in July to boost prices, resulting in output levels around 9 million barrels per day, approximately 1 million barrels below the average of the past decade. Oil revenues declined by 18% to 147 billion riyals during July to September, while non-oil income decreased by 17% to 112 billion riyals. The International Monetary Fund (IMF) estimated that Saudi Arabia would need crude prices close to $86 per barrel to balance its budget, higher than the IMF's previous estimate. The breakeven point is expected to rise to $110 in the second half of this year when considering spending by the Saudi sovereign wealth fund. The widening budget deficit and ongoing fiscal shortfalls highlight the challenges faced by Saudi Arabia in managing its finances and transforming its economy.

Implications for New Businesses

The widening budget deficit in Saudi Arabia could have significant implications for new businesses, particularly those operating within the energy sector. The kingdom's economic contraction and the decrease in both energy and non-oil income could potentially create a challenging business environment.

Opportunities and Challenges

On one hand, the reduction in oil production to boost prices may create opportunities for energy-efficient or alternative energy businesses to thrive. On the other hand, the fiscal shortfall and economic contraction could lead to less government spending and investment in the private sector, which could pose challenges for new businesses seeking financial support or partnerships.
Global Impact
Moreover, the IMF's estimation that Saudi Arabia would need crude prices close to $86 per barrel to balance its budget could have global implications. If crude prices rise significantly, this could impact the cost of energy worldwide, affecting businesses across various sectors. In conclusion, while the widening budget deficit in Saudi Arabia presents certain challenges, it also opens up potential opportunities for new businesses, particularly in the energy sector. However, new businesses must be prepared to navigate the complexities of this changing economic landscape.
Story First Published at: https://financialpost.com/pmn/business-pmn/saudi-budget-deficit-blows-out-to-9-5-billion-as-revenues-slip
Brought to you by BusinessFormation.io
Know Your State's Registered Agent Requirements: What is a Registered Agent
Learn How To Create An LLC: What Is An LLC and How To Start an LLC Online
Business Formation Services: View Top 3 Online LLC Filing Companies

LLC Filing & Registered Agent Services

Compare Online LLC Filing Services Today

We work with the market leaders in business formation and registered agent services.

Getting started is simple and inexpensive. Form your business today & secure your brand name before someone beats you to it! Click below to view the Top 3 Best LLC and registered agent service providers.
View Top 3 Providers Now

Filing An LLC Can Be Complicated

Streamline Your LLC Filing Online for $39

Northwest Registered Agent is the best-rated service for first time filers.

Get professional LLC formation & registered agent services for only $39 + state filing fee. This offers includes your full LLC setup, plus a private business address, lifetime support, and more.

Trusted by Millions. Save 82% Today.