Saudi Arabia lost $200B on low oil prices
Baku, Azerbaijan, Sept. 7
By Aygun Badalova - Trend:
The collapse in oil prices has caused Saudi Arabia’s annual oil export revenues to fall by around $200B compared with their peak in 2012, which is equal to around 30 percent of last year’s GDP, according to the report of the British economic research and consulting company Capital Economics, obtained by Trend.
At the same time, analysts believe that the Kingdom’s authorities will continue to rely on a period of fiscal austerity to make the adjustment to low oil prices.
Jason Tuvey, the Middle East Economist at the company said in the report, that recovering of oil prices over the coming years (reaching $60 a barrel by the end of next year and $65 a barrel by end-2018, according to Capital Economics’ forecasts) will ease some of the strain on Saudi Arabia’s finances.
Oil prices rose on September 7 on a slightly weaker dollar despite dwindling hopes for a production freeze agreement between major producers, the Wall Street Journal reported.
The November contract for global crude benchmark Brent edged 0.66 percent higher to $47.57 a barrel, while its US counterpart WTI gained 0.71 precent to $45.15 for October deliveries.
British analysts estimate that Saudi Arabia’s oil export receipts and government oil revenues will be $60-70 billion higher in 2018 compared with this year.
“Nonetheless, that won’t be enough to close the large twin deficits,” Tuvey said.
Significant progress has already been made, with spending likely to have been cut by a cumulative 26 percent by the end of this year, Tuvey believes.
“Accordingly, we think there’s scope for the pace of austerity to be scaled back next year. From a political perspective, fiscal consolidation gives the government greater control over how the losses from lower oil prices are distributed,” he said.