High oil will not fuel another Saudi spending boom

26 April 2012

Kingdom to invest its excess 2012 petrodollars in foreign assets

The boost to Saudi Arabia’s oil revenues brought about by record prices in 2012 will not fuel a public-service spending boom, but instead be channelled into Saudi Arabian Monetary Agency (Sama) funds abroad, according to the head of research of the local Jadwa Investment.  

The kingdom’s current account surplus is set to hit $154bn this year, 25 per cent of gross domestic product (GDP) The trade surplus is set to hit $254bn due to increased oil exports.

Sama assets have increased by $20bn in the first quarter of the year and Jadwa predicts the kingdom will save $100bn in foreign assets during 2012. “Government spending has doubled since 2005, but this year Riyadh will be looking to increase its savings,” said Paul Gamble, head of research at Jadwa, at MEED’s Saudi Arabia Energy EPC conference on 23 April.

In 2005, Saudi Arabia spent $92bn, but in 2011 that figure hit a record $214bn as Riyadh ushered in massive pay increases for public-sector workers.

Gamble said public spending would still be high in 2012 and 2013, coming in at $201bn and $212bn respectively.

“Riyadh is still spending massive amounts on infrastructure projects and this will continue,” said Gamble. “But Saudi Arabia has been cutting debt and increasing its savings, and this will continue for the rest of the year.”  

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