Saudi Arabia’s oil revenue is expected to jump about 66 per cent this year to about $249 billion amid surging crude prices that will enable the Arab world’s biggest economy to boost spending, according to Jadwa Investment.
Brent, the benchmark for two thirds of the world's oil, rose 69 per cent year on year in the first quarter of this year to an average of $103 per barrel, and that rise was reflected in a “substantial jump in royalties and income tax received by the Ministry of Finance", Asad Khan, chief economist and head of research at Jadwa, said in a research note on Wednesday.
“As oil prices remain elevated, and Saudi crude oil production rises in line with the Opec+ agreement, we expect government oil revenue to continue showing sizeable yearly rises.”
Both Brent and West Texas Intermediate, the benchmark for US crude, have surged more than 60 per cent since the beginning of the year. Brent climbed to a notch under $140 per barrel in March, its highest since 2008, before giving up some gains.
The war in Ukraine and the subsequent western sanctions against Russia, the world's second-largest energy exporter, have caused oil prices to soar. The tightening net of sanctions is stoking fears of a supply shock to the global energy market amid strong demand for crude.
Brent is expected to average $100 a barrel this year, its highest median since 2013, according to the World Bank. Emirates NBD expects crude to average $120 per barrel in 2022.
Saudi Arabia’s revenue in the first quarter of this year rose 36 per cent to 278bn riyals ($74bn), with income from oil climbing 58 per cent on an annual basis to 183bn riyals, the Ministry of Finance said on Sunday.
The kingdom’s spending in the first three months of the year also rose 4 per cent to 220bn riyals. Jadwa estimates a 5 per cent overspend versus budgeted levels, with the world’s biggest oil exporter's spending climbing to about 1 trillion riyals.
“Looking ahead, we expect a pick-up in outlays on development projects during the remainder of the year, particularly on vision [2030] realisation programmes, to raise capital expenditure on a quarterly basis,” Mr Khan said.
As oil prices remain elevated, and Saudi crude oil production rises in line with the Opec+ agreement, we expect government oil revenue to continue showing sizeable yearly rises.”
Asad Khan,
chief economist and head of research, Jadwa
The kingdom’s non-oil revenue rose 7 per cent to 94.2bn riyals at the end of March, although Jadwa expects the kingdom's non-oil income for the full year to slide.
“While we expect some segments within non-oil revenue to continue showing yearly rises, our current forecast assumes full-year 2022 non-oil revenue, as a whole, to decline by 9 per cent year on year, primarily because of lower yearly ‘taxes on goods and services’,” Mr Khan said.
The kingdom posted a fiscal surplus of 57.5bn riyals in the first quarter. Jadwa estimates a 2022 surplus of 298bn riyals, about 7.8 per cent of Saudi Arabia's gross domestic product and “naturally expected” surpluses during the remaining quarters of the year.
The International Monetary Fund estimates the Saudi economy to expand 7.4 per cent this year, driven by higher oil revenue, a projected improvement in the country's non-oil GDP and its efforts to diversify the economy.
Continued recovery from the pandemic also underpins the kingdom’s economic growth, which the World Bank estimates at 7 per cent this year. Jadwa estimates the economy will expand 7.7 per cent in 2022.
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The National in Davos
We are bringing you the inside story from the World Economic Forum's Annual Meeting in Davos, a gathering of hundreds of world leaders, top executives and billionaires.
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Some of Darwish's last words
"They see their tomorrows slipping out of their reach. And though it seems to them that everything outside this reality is heaven, yet they do not want to go to that heaven. They stay, because they are afflicted with hope." - Mahmoud Darwish, to attendees of the Palestine Festival of Literature, 2008
His life in brief: Born in a village near Galilee, he lived in exile for most of his life and started writing poetry after high school. He was arrested several times by Israel for what were deemed to be inciteful poems. Most of his work focused on the love and yearning for his homeland, and he was regarded the Palestinian poet of resistance. Over the course of his life, he published more than 30 poetry collections and books of prose, with his work translated into more than 20 languages. Many of his poems were set to music by Arab composers, most significantly Marcel Khalife. Darwish died on August 9, 2008 after undergoing heart surgery in the United States. He was later buried in Ramallah where a shrine was erected in his honour.
US tops drug cost charts
The study of 13 essential drugs showed costs in the United States were about 300 per cent higher than the global average, followed by Germany at 126 per cent and 122 per cent in the UAE.
Thailand, Kenya and Malaysia were rated as nations with the lowest costs, about 90 per cent cheaper.
In the case of insulin, diabetic patients in the US paid five and a half times the global average, while in the UAE the costs are about 50 per cent higher than the median price of branded and generic drugs.
Some of the costliest drugs worldwide include Lipitor for high cholesterol.
The study’s price index placed the US at an exorbitant 2,170 per cent higher for Lipitor than the average global price and the UAE at the eighth spot globally with costs 252 per cent higher.
High blood pressure medication Zestril was also more than 2,680 per cent higher in the US and the UAE price was 187 per cent higher than the global price.
Your rights as an employee
The government has taken an increasingly tough line against companies that fail to pay employees on time. Three years ago, the Cabinet passed a decree allowing the government to halt the granting of work permits to companies with wage backlogs.
The new measures passed by the Cabinet in 2016 were an update to the Wage Protection System, which is in place to track whether a company pays its employees on time or not.
If wages are 10 days late, the new measures kick in and the company is alerted it is in breach of labour rules. If wages remain unpaid for a total of 16 days, the authorities can cancel work permits, effectively shutting off operations. Fines of up to Dh5,000 per unpaid employee follow after 60 days.
Despite those measures, late payments remain an issue, particularly in the construction sector. Smaller contractors, such as electrical, plumbing and fit-out businesses, often blame the bigger companies that hire them for wages being late.
The authorities have urged employees to report their companies at the labour ministry or Tawafuq service centres — there are 15 in Abu Dhabi.
