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February 2015

Report Series

Office of the Chief Economist Economics Department Samba Financial Group P.O. Box 833, Riyadh 11241 Saudi Arabia ChiefEconomist@samba.com +4420-7659-8200 (London) This and other publications can be Downloaded from www.samba.com

It has been a challenging start to the year for the global economy as investors fret that the deflation evident in the Eurozone will spread to other parts of the globe as oil prices continue to fall. Our view is that while the Eurozone and Japan have pronounced structural weaknesses contributing to deflation, the threat to the rest of the world has been exaggerated. In fact, we think that low oil prices will boost consumption, especially in many Emerging Markets, but also the US. The US consumer remains the engine of global demand and a pickup in spending there will be a boon to many countries.

Oil prices themselves appear to have found a floor at around $50/b (Brent) down from last June’s peak of $115/b. The slump owes much to the perception that geopolitical threats are fading, but more fundamentally to supply additions in an environment of anaemic demand. OPEC has backed away from any attempt to stanch this supply, calculating that any cuts would need to be deep to generate an adequate price response and would mean an unacceptable loss of market share. OPEC members are therefore set to keep output high for the time being.

With the market in such a state of flux forecasting prices is even more perilous than usual. Nevertheless, prices at or around $50/b should be enough to stem the flow of US crude, and should also provide a boost to global economic activity. Thus, one might expect Brent to average $60/b this year, trending up over the medium term to reach $85/b by 2018. However, this forecast could easily be derailed by the lifting of sanctions on Iranian oil exports, and by advances in US drilling techniques which could extend the US production horizon and reduce marginal costs.

For Saudi Arabia, the landscape has clearly changed since our last forecast report, but perhaps not by as much as some think. Our basic view is that government spending will continue to grow, in nominal terms at least, for the next four years. The reasons behind this assumption include the fraught regional political environment and the fact that savings have been accumulated for just this eventuality.

Spending growth will certainly be softer than in recent years, but will be

enough to keep the nonoil economy ticking over. With overall spending set to grow by an annual average of 4.4 percent in 2015-18, we anticipate real nonoil GDP growth of 3.6 percent over the same period. Fiscal deficits are unavoidable but these will be financed by savings. Beyond the forecast horizon, recourse to domestic debt might be necessary, but issuance will be starting from a very low base.

Saudi Arabia:

Baseline Macroeconomic Forecast

2015-18 Executive Summary

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The Global Economic Backdrop

Deflation haunts investors... The global economy has had a rocky start to 2015. Deflation appears to be stalking not just the Eurozone and Japan, but much of the globe. This has roiled financial markets with equities being sold in favour of long-dated bonds, while traditional haven currencies such as the yen and the Swiss franc are back in favour, and even gold has made a comeback. Fears of a long period of deflation seem well grounded in the Eurozone, where structural factors are largely at play: years of wage compression and high unemployment, along with stagnant population dynamics have taken their toll on private consumption. The ECB has finally acted, announcing a €60 bn-a-month programme of QE, which may or may not be enough to restore confidence and boost private spending. Japan, too, faces similar long-standing challenges, and the recent strengthening of the yen will not help its cause. In China, inflation is also falling quite quickly, and the rapidly cooling …but low oil prices should be a net positive for global activity But the deflationary challenge has probably been exaggerated in large parts of the globe. In fact in China we think there is ample capital, liquidity and moral suasion in the system to prevent a drift into generalised falling prices. Moreover, in many countries, disinflation is mainly a product of lower oil prices, which could well be a boon to domestic consumption. In oil-importing EMs in particular, where per capita oil consumption is high, falling petrol prices should stimulate demand, while also allowing governments to divert spending away from expensive energy subsidies towards more productive investment. Most importantly, global deflationary fears should be allayed by the robust US economy, which is now growing at a 3 percent-plus pace, with consumption supported by rapid gains in employment, signs of an uptick in real wages and of course lower gasoline prices. US consumption is no panacea to the world’s economic problems, but it should remain an important and gathering tailwind. Oil prices struggle to find a floor at $50/b Indeed, oil prices have continued to fall, with Brent struggling to find a floor at $50/b—a 57 percent decline from the most recent high in June 2014. The reasons for the precipitous fall in prices are well rehearsed (see our Oil Market Outlook, December 2014), but to summarise, the geopolitical uncertainty and tensions of the past few years tended to obscure the fact that oil markets were

2013 2014 2015f 2016f 2017f

World 3.0 3.0 3.5 3.8 3.9

US 2.2 2.4 3.3 2.8 2.8

Japan 1.5 0.3 1.0 1.0 1.3

Euro area -0.4 0.7 1.1 1.5 1.5

China 7.7 7.4 6.6 6.5 6.2

Emerging Markets 4.0 3.9 4.5 5.3 5.5

Saudi Arabia 2.7 3.6 2.6 1.5 2.0

US 0.25 0.25 0.75 2.00 2.75

Japan 0.10 0.10 0.10 0.10 0.20

Euro area 0.25 0.15 0.15 0.15 0.15

Brent 107.0 100.0 60.0 70.0 82.0

Samba estimates and forecasts

Real GDP growth (percent change)

World Economic Outlook

Official policy rate (end period)

Oil Price ($/b period average)

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actually very well supplied. Once these tensions dissipated, or at least became normalised, it became apparent to many that there was plenty of oil to meet demand. Moreover, demand itself was beginning to look soft, with China’s slowdown becoming increasingly obvious and the Eurozone drifting into deflation. The price fall accelerated in the wake of OPEC’s meeting in November at which it was decided “to let the market determine the price”. This stance reflects Saudi Arabia’s decision to protect or expand market share rather than act as swing producer and cut production in a bid to prop up prices. Thus, the Kingdom has kept production relatively high and has cut official selling prices aggressively in key markets such as East Asia. The Kingdom’s authorities know that they can ride out a prolonged period of low oil prices thanks to foreign assets worth some 100 percent of GDP. They will also be hoping that a low oil price environment will be enough to stem the tide of North American tight oil production—there is already a slowdown in rig hires in the US. A cut in OPEC production no longer seems likely this year We had earlier assumed that Saudi Arabia might have hoped that low oil prices would be enough to concentrate the minds of its OPEC partners to agree to share the burden of production cuts at its June meeting. However, such cuts would mean OPEC losing market share and would likely have to be deep in order to trigger an adequate price response. Thus, we no longer think that production cuts are on the Kingdom’s agenda. Rather, we expect Saudi Arabia to keep production at current levels for the foreseeable future, and allow the price to be determined by the market. For 2015-17 we therefore think that production will stay at around 9.6 m b/d, albeit with seasonal variations. We see prices trending up to $85/b by 2018, but with considerable downside risk Prices are still in a state of flux so it is difficult to give price forecasts with any degree of certainty. However, assuming low oil prices force a reduction in the pace of US tight oil output, and also assuming that low oil prices themselves stimulate additional consumer demand for gasoline, then we should see an average for Brent of $60/b in 2015, edging up to $70/b in 2016 as global demand continues its fitful recovery. This trend should be consolidated in 2017-18 when oil prices are expected to move back above $80/b, averaging $85/b in 2018. There are plenty of uncertainties of course, a major one of which is Iran, which could have sanctions lifted this year or next

Protecting or expanding market share is the priority for Saudi Arabia.

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depending on progress over nuclear talks with the West. This could mean global markets having to absorb an additional 1 million barrels or thereabouts in 1-2 years. This would clearly put further downward pressure on prices and lead us to revise our forecast. Additional variables include the evolution of US recovery techniques, which could well extend the US shale production horizon and keep global oil prices lower for longer.

The Outlook for Saudi Arabia Lower oil prices will clearly weigh on economic activity to some extent, but the government remains committed to supporting the local economy, even at the expense of large fiscal deficits. Indeed, this year is unlikely to be particularly different to 2014, with the 13th Islamic month automatically pushing public spending higher than normal and King Salman promising two bonus months of public sector salaries; however, the more constrained environment will become apparent in 2016-18. Higher interest rates are also expected to feed through in the later years, but the impact of this is likely to be cushioned by a stronger riyal, which will be an important offset for an import-dependent economy such as Saudi Arabia. Oil revenue set to slide by 38 percent this year Starting with revenue, we see the government’s take from oil falling by almost 38 percent in 2015 as Brent flops to an average of $60/b from $100/b last year. As noted above, production is assumed to remain more or less stable. Total revenue is therefore expected to be about SR776 bn in 2015, slightly higher than the SR742 bn recorded in 2010, for example. A moderate recovery in oil earnings is in prospect for 2016-18 as the flow of US tight oil is partially stanched, allowing prices to increase to an average of $85/b by 2018. This would see overall revenue rise to SR1.1 tn by 2018. Note that nonoil revenue, a large part of which is earnings from customs, is expected to show only incremental growth. History suggests that spending growth will be maintained, but at a much-reduced rate What of spending? In the absence of intra-year fiscal data or comprehensive end-year accounts, forecasting government spending is hazardous, and even more so given the collapse in oil prices. Our general sense is that spending growth will be maintained, and we are guided here by what happened in 2009. That year saw prices fall by a similar amount: from $100/b in 2008 to $62/b. However, the government kept spending high, even increasing the rate from 12 percent to 14 percent. The government dipped into reserves (which were considerably less

The landscape has changed, but we think that the government will maintain spending growth in order to support the local economy.

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than they are now) to finance a fiscal deficit that reached over 5 percent of GDP. We also note that in the late 1990s with oil prices hovering near $10/barrel the government was prepared to build up a large stock of domestic debt to support the local economy. Of course, history is not a definitive guide, and a counter-argument would be that “this time it’s different” and the authorities recognise that the oil market is at a major inflexion point and will reduce spending accordingly. However, we doubt this. If our oil price forecast is correct—or at least showing the right direction—prices should begin to recover over the next twelve months, albeit gradually. We think this will give the government the confidence to increase spending. The other important factor weighing on policymakers’ minds is the regional political environment. This is arguably at its most fraught for a generation, and we very much doubt that the government would countenance major spending cuts with the region in such a state of flux. Here, 2011 is instructive: spending was increased by a quarter following the outbreak of regional revolutions. For all this, the government is unlikely to keep blithely spending as if nothing has happened. A tighter fiscal stance is clearly called for, and it is on the capital side that we think this will occur. There are large capital spending commitments already in place for this year, and these are unlikely to be threatened: plenty of political capital has been invested in them, and crucially, earmarked funds are available to finance them. Some SR515 bn (or 20 percent of forecast GDP) is available at the central bank specifically for allocated capital projects. In 2016-18 capital spending growth is likely to slow quite markedly as the authorities attempt to improve the fiscal position. Thus we think capital spending growth will slow to an annual average of just 1.3 percent during those years—a dramatic slowdown on the 25 percent annual rate registered in 2011-14. But capital outlays will still be substantial: at SR510 bn, spending in 2018 is anticipated to be some 78 percent higher than in 2011, for example. The Islamic calendar will provide an automatic boost to spending this year, as will King Salman’s announcement Current spending is set to remain reasonably firm, particularly this year following King Salman’s announcement of two bonus months’ salary payments for all public sector workers and the impact of the 13th Islamic month. Spending growth is likely to soften appreciably in 2016-17, as the government finally adjusts to the lower oil price environment (at least partially) but the Islamic calendar will come back into play in 2018. While the government is not about to cut spending on public sector wages and salaries, it is fair to assume that efforts to “Saudiize” the

Oil prices are low now, but they should slowly start trending up. This should give the authorities confidence to keep spending.

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private sector will be intensified. The possibility of higher domestic fuel prices will also be moved up the political agenda (especially given the impact of domestic fuel consumption on the exportable surplus, see below). A slower pace of government spending will weigh on the contracting sector, but consumption has good supports How will the nonoil economy be affected by this spending profile? A weaker pace of public investment growth will clearly feed through into the contracting sector, though that will be more obvious in 2016-18. Some private investment is also likely to be shelved given weaker oil prices. But many private investors are also likely to calculate that government spending on wages and salaries is unlikely to be touched, and that therefore private consumption should continue to grow at a decent pace (indeed a pickup is in prospect this year thanks to the 13th month and King Salman’s pledge). Moreover, canny investors will look beyond the oil price fall at other factors: The high population growth rate—roughly 2.5 percent for nationals—will continue and credit penetration is also likely to increase as banks invest more in retail lending. The opening of the stock market has the potential to raise asset prices and confidence (though perhaps not as much as before the oil price slump). Thus, investment in retail, hotels, restaurants etc, is likely to grow at a decent pace. The back end of this year—or possibly early 2016—should also bring higher interest rates. Ostensibly, this will put pressure on any over-leveraged households and firms, but the pass-through is likely to be weak and there will be a powerful offsetting impact from the stronger US dollar (which will be the natural corollary of higher rates). In an import-dependent economy such as Saudi Arabia’s, the stronger dollar will reduce import costs and free up disposable income for both consumers and companies. Thus, we think that higher interest rates might on balance be neutral for the economy, with the exchange rate effect helping to offset the any unwelcome impact on debt financing. Nonoil exports should recover somewhat Saudi nonoil exports have suffered from the slowdown in China and a varied economic performance from its other main markets in East Asia. The outlook for Chinese demand appears weak in the short run, but in the longer term the huge potential of the Chinese automotive industry indicates that demand for speciality chemicals of the type that Saudi Arabia has carefully invested in will grow. Other Asian countries should also continue to suck in Saudi intermediate goods as demand for Asian manufactures in the US and, to a lesser extent the Eurozone, picks up again. The expected strength of the dollar will hamper Saudi export growth

Current spending should show reasonable growth and private consumption has good supports.

Higher interest rates could put pressure on some businesses and households, but a stronger dollar should be an important offset for the economy as a whole.

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to some extent, but this will at least make imported inputs cheaper for Saudi firms. We now see nonoil growth trending down in the next couple of years before picking up in 2017-18 Drawing these strands together, we expect Saudi nonoil GDP growth to ease to 4.5 percent in 2015, from 5.1 percent in 2014 (official figure). This represents a slowdown from the five-year average of 6.8 percent, but remains decent and certainly compares well with most other Emerging Markets. Nonoil growth is expected to cool to 1.6 percent in 2016, as the tighter fiscal stance feeds through (and as the calendar reverts to 12 months), before gathering pace again in 2017 and 2018 as rising oil prices restore some private sector confidence. By 2018 we expect the nonoil economy to be expanding at a 5.4 percent pace. With the oil sector contributing little growth, the trend in overall real GDP growth is expected to be very similar to that of nonoil GDP, growing by 2.6 percent this year, before dipping down to 1.5 percent in 2016. Growth of 2 percent is in prospect for 2017 before an acceleration to 3.8 percent in 2018. Clearly, though, this is a fair way off and any projection is hostage to developments in oil market fundamentals, which remain fluid. Inflationary pressures are set to remain muted thanks to a stronger dollar Inflationary pressures are expected to remain muted over the next three years. Domestically, the main inflationary impulse will come—as ever—from rents. Despite plans for a publicly-led surge in home-building, there remains a large deficit of dwellings, particularly at the affordable end. External inflationary dynamics are likely to remain benign. A series of good harvests and decent growing conditions have seen agricultural commodity prices fall quite sharply this year. For Saudi Arabia, the most important commodities are wheat and sugar, both of which have come down in price. A strengthening dollar should help to keep a lid on most commodity prices for the rest of the year and beyond (assuming reasonable harvests). Industrial commodities have been kept in check, largely by weakening Chinese demand and still-strong gains in global production (of iron ore, for example). Allied to the stronger dollar, this should help to soften imported input prices for Saudi firms, who are in any case prepared to absorb costs in a bid to protect market share. Thus, although rental inflation will likely remain fairly robust, we think that this will be more than offset by weakening external pressures, and overall inflation is expected to remain comfortably below 2.5 percent through the forecast period.

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The fiscal outlook has deteriorated sharply, though projected deficits could still be financed from government savings The much weaker oil price profile has worsened the fiscal outlook, though we project that the government should still be able to finance its position with existing savings at least through 2018. We now expect the government to record large fiscal deficits in the next few years. As noted above, spending growth this year will by necessity remain higher than normal, and combined with a 26 percent plunge in overall revenue, this will mean a deficit of 16 percent of GDP. The fiscal position is expected to improve somewhat in 2016-18 as oil prices gradually recover and the fiscal stance is tightened. However, we still forecast sizeable deficits of an average 8.7 percent of GDP during this period. We estimate the total nominal sum to be financed in the 2015-18 period at SR1.2 trn ($320 bn). This is clearly a sizeable amount, but it can be financed from existing resources without recourse to debt issuance. Sama put “Government Deposits” with itself and the rest of the banking system at SR1.56 trn in December 2014—more than enough to cover the projected deficits. One could also probably add most of the SR940 bn listed in the “Other Items” column, since the bulk of this is likely to be government sector deposits (the sum of “Government Deposits” and “Other Items” equates roughly to Sama’s net foreign assets). However, we exclude this since it is not explicitly listed as public assets. Excluding the “Other Items” from our projections, we see that net public sector savings will be worth just SR294 bn by end-2018, or about 9 percent of projected GDP. This is a much-reduced cushion, and while acknowledging that the “other items” could probably be brought into play, and while also accepting that latent domestic demand for government debt is strong, one has to ask why such a large financing commitment has arisen. To give some historical context, the government recorded a surplus in 2010 when oil prices averaged $78/b. Why has the “breakeven” oil price risen so high so quickly? Part of the answer is the domestic thirst for oil-based products, driven by power and gasoline demand. The domestic price of oil is heavily subsidised, and this has spurred brisk growth in domestic demand. We use

The fiscal outlook has clearly deteriorated, but we note the government has substantial savings. Structural reform has become more pressing however.

Saudi Arabia: Fiscal Financing (riyals billion) 2013 2014 2015f 2016f 2017f 2018fCentral government balance 163.0 -54.4 -393.6 -307.2 -217.8 -241.5 % GDP 5.8 -1.9 -15.6 -11.3 -7.3 -7.6Central government gross domestic debt 93.8 98.9 100.9 102.9 105.0 107.1 % GDP 3.3 3.4 4.0 3.8 3.5 3.4General govt deposits with banking system 1641.5 1560.7 1167.1 859.9 642.2 400.6 % GDP 58.5 54.4 46.2 31.6 21.6 12.6General govt net domestic deposits 1547.7 1461.8 1066.2 757.0 537.2 293.6 % GDP 55.2 51.0 42.2 27.8 18.1 9.3Memo: "Other items (net)" 854.8 941.0

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the BP series for domestic oil consumption, which is volatile, but shows almost 6 percent annual average growth over the past decade. This has far outstripped the gains in Saudi production over the same period and has therefore eroded the exportable surplus (In fact, the government’s breakeven oil price would have been higher were it not claiming a higher share of the revenues from this exportable surplus from Saudi Aramco—86 percent so far this decade, compared to 76 percent during the 2000s). The impact of subsidies on the exportable surplus is emblematic of a wider picture of skewed incentives that have put pressure on the public purse. This is most notable with employment, where pay and other benefits in the public sector are still more appealing to most Saudis than private sector employment. Consequently, Saudi public sector employment has increased at an annual rate of 5.5 percent in the past 10 years, and at 7 percent in the past five years. This is the main reason why real government spending has increased from an already high 51 percent of real nonoil GDP in 2010 to 59 percent last year, and explains why an oil price of $100/b—let alone one of $60/b--is no longer enough to guarantee a fiscal surplus. Authorities have taken strides to address these issues There is no doubt that the authorities are taking steps to address the challenge, most notably by encouraging more Saudi nationals to find private sector jobs. This has been a qualified success, with women in particular moving out of the home to take jobs, especially in retail. Efforts to diversify the industrial base are also ongoing and are focused on creating refining and petrochemicals plants which can produce more complicated and higher-value chemicals, particularly for the automotive industry in East Asia. As for energy there is a good deal of investment planned for nuclear and solar capacity. All this is impressive, but further efforts to rebalance lopsided incentives by raising the cost of petrol, or reducing public sector perks and other privileges are still necessary. Current account set to record reduced surpluses Lower oil prices will clearly have a bearing on the country’s terms of trade, but we think that the current account will continue to return surpluses in the next few years. Substantially weaker oil prices and flat oil production is the main reason for a likely 35 percent decline in overall export earnings this year. Some pick up is envisaged for 2016-18 as prices recover, but oil export earnings in 2018 ($248 bn) will remain some 18 percent below 2014 earnings ($304 bn).

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The slump in oil earnings gives greater importance to nonoil exports, which are likely to perform quite well, given growing East Asian demand for intermediates to supply the buoyant US market, but will be held back to some extent by the stronger riyal. Import demand will be supported by the stronger currency and moderate growth in project spending this year. However, import costs will be sharply reduced by the ongoing slide in commodity prices. Commodity prices are expected to remain weak for the medium term given the stronger dollar and slowing Chinese growth, and a further reduction in import costs seems likely in 2016. A mild recovery in 2017-18 is anticipated as domestic confidence perks up again. These trends suggest that the visible trade balance will continue to record decent, albeit much-reduced surpluses in 2015-18, but on a rising trend. There is a structural deficit on the invisibles balance, which is heavily influenced by remittances flows. These are volatile and difficult to predict, but the general trend is likely to be weaker outflows given the slowing economy. All this suggests that the current account will record reasonable surpluses equivalent to an average 6 percent of GDP over the forecast period. The fact that the current account is set to remain in surplus even with heavily reduced oil earnings shows that the Kingdom’s overall financial position remains sound. Rather, it is the fiscal position where attention is needed. Reserves will be drawn down but should remain substantial Flows on the financial account tend to be volatile and unpredictable, and data are often incomplete. However, they are almost always negative, with portfolio outflows outweighing inward investment. We expect FDI inflows to weaken as investment in refining and petrochemicals capacity cools. Historically, portfolio inflows have been negligible, mainly due to legal restrictions. With the stock market set to open this year we expect these to rise, but the increase might not be as dramatic as earlier anticipated given the slump in oil prices and the perceived implications for corporate performance. Most importantly, the fiscal financing requirement will put pressure on foreign assets, especially given the import-dependent nature of the economy. Thus, we expect net foreign assets to decline to just over $600 billion by end-2018 (71 percent of GDP), from around $730 billion (96 percent of GDP) in 2014. This is still a substantial buffer, and should be more than enough to deal with any bouts of pressure on the currency peg.

International reserves are set to be depleted, but should still be in excess of 70 percent of GDP at the end of 2018.

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Saudi Arabia: Baseline Macroeconomic Forecast 2012 2013 2014 2015f 2016f 2017f 2018f

Nominal GDP ($ bn) 733.9 748.0 764.6 673.2 726.2 791.5 845.9

GDP per capita ($ '000) 25132 24942 24988 21340 22327 23626 24513

Real GDP (% change) 5.3 2.7 3.6 2.6 1.5 2.0 3.8

Hydrocarbon GDP 5.1 -1.6 1.7 0.2 1.2 0.6 1.5

Non-hydrocarbon GDP 5.5 6.4 5.1 4.5 1.6 3.0 5.4

Nominal GDP (% change) 9.6 1.9 2.2 -12.0 7.9 9.0 6.7

Hydrocarbon GDP 7.9 -4.1 -4.3 -35.9 16.4 16.1 4.8

Non-hydrocarbon GDP 11.3 9.0 8.0 6.9 3.8 5.2 7.8

Commercial bank deposits (SR bn) 1260.6 1402.0 1575.6 1717.4 1786.1 1875.4 1969.2

% change 14.2 11.2 12.4 9.0 4.0 5.0 5.0

Commercial bank loans (SR bn) 1038.6 1167.6 1302.4 1419.6 1462.2 1520.7 1596.7

% change 16.7 12.5 11.5 9.0 3.0 4.0 5.0

3 month interbank rate (end year, percent) 1.0 0.9 0.9 1.2 2.0 2.6 3.6

CPI inflation (% change, average) 2.9 3.5 2.7 2.4 2.2 2.2 2.4

Hydrocarbon exports ($ bn) 337.7 322.2 304.1 176.1 204.0 236.1 248.4

% change 6.2 -4.6 -5.6 -42.1 15.8 15.7 5.2

Current account balance ($ bn) 164.7 132.8 118.4 3.4 36.5 63.6 77.9

(% GDP) 22.4 17.8 15.5 0.5 5.0 8.0 9.2External debt ($ bn) 1 83.0 83.3 85.0 86.7 88.4 90.2 92.0

(% GDP) 11.3 11.1 11.1 12.9 12.2 11.4 10.9

(% current account receipts) 19.6 20.2 21.4 31.7 28.9 26.4 25.2Fiscal revenue (SR bn) 1247.4 1156.0 1046.0 776.0 884.1 1013.8 1064.9 (% change) 11.6 -7.3 -9.5 -25.8 13.9 14.7 5.0Fiscal spending (SR bn) 916.6 993.0 1100.4 1169.6 1191.3 1231.6 1306.4

(% change) 9.2 8.3 10.8 6.3 1.9 3.4 6.1

of which, capital 305.5 400.7 472.5 490.0 495.0 502.0 510.0

(% change) 6.4 31.2 17.9 3.7 1.0 1.4 1.6

current 621.2 593.6 627.9 679.6 696.3 729.6 796.4

(% change) 9.6 -4.4 5.8 8.2 2.5 4.8 9.2

Fiscal balance (SR bn) 330.8 163.0 -54.4 -393.6 -307.2 -217.8 -241.5

(% GDP) 12.0 5.8 -1.9 -15.6 -11.3 -7.3 -7.6

Public sector gross deposits with banking system (SR bn) 1515.7 1641.5 1560.7 1167.1 859.9 642.2 293.6

(% GDP) 55.1 58.5 54.4 46.2 31.6 21.6 12.6

Public sector gross domestic debt (SR bn) 82.1 93.8 98.9 100.9 102.9 105.0 107.1

(% GDP) 3.0 3.3 3.4 4.0 3.8 3.5 3.4

Public sector net deposits with banking system (SR bn) 1433.6 1547.7 1461.8 1066.2 757.0 537.2 293.6

(% GDP) 52.1 55.2 51.0 42.2 27.8 18.1 9.3

Memoranda:

Oil price (Brent; $/barrel) 111.6 107.0 100.0 60.0 70.0 82.0 85.0

Crude oil production ('000 b/d) 9798 9640 9666 9596 9621 9621 9717

Net Foreign Assets ($ bn) 683.0 753.0 732.0 630.4 585.0 590.6 604.1

(% GDP) 93.1 100.7 95.7 93.6 80.6 74.6 71.41 Foreign liabilities of Saudi banks and non-financial enterprises.

Sources: SAMA; Ministry of Finance and National Economy; World Bank; Samba.

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James Reeve Deputy Chief Economist James.Reeve@samba.com Andrew Gilmour Deputy Chief Economist Andrew.Gilmour@samba.com Thomas Simmons Economist Thomas.simmons@samba.com

Disclaimer This publication is based on information generally available to the public from sources believed to be reliable and up to date at the time of publication. However, SAMBA is unable to accept any liability whatsoever for the accuracy or completeness of its contents or for the consequences of any reliance which may be place upon the information it contains. Additionally, the information and opinions contained herein: 1. Are not intended to be a complete or comprehensive study or to

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