Saudi Arabia's oil revenue expected to rise 66% to $249bn

Jadwa Investment estimates Riyadh's expenditure to increase by 5% this year

Riyadh, Saudi Arabia, where the national economy is expected to expand sharply this year owing to elevated oil prices. EPA

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.

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.