Saudi Arabia adjusting to new reality of cheap oil

Saudi Arabia adjusting to new reality of cheap oil

Baku, Azerbaijan, Oct. 8

By Aygun Badalova - Trend:

Saudi Arabia, the world largest oil exporter, is now adjusting to the new reality of cheap oil.

Recent reports surfacing that Saudi Arabia is to undertake a significant fiscal squeeze come as little surprise and support the view that, although the country's economy has held up well this year, GDP growth looks set to slow in 2016-17, according to Jason Tuvey, Middle East Economist at British economic research and consulting company Capital Economics.

Saudi Arabia is ordering a series of cost-cutting measures as the slide in oil prices weighs on the kingdom's budget, Bloomberg reported with the reference to two people familiar with the matter.

The finance ministry told government departments not to contract any new projects and to freeze appointments and promotions in the fourth quarter, the people said, asking not to be identified because the information isn't public.

It also banned buying vehicles or furniture, or agreeing any new property rentals and told officials to speed up the collection of oil revenue, they said.

"The announcement of such measures comes as little surprise given that the Kingdom is grappling with a more than 50 percent plunge in oil prices (oil accounts for almost 90 percent of government revenues) and a budget deficit that is likely to widen to an eye-watering 20 percent of GDP this year," Tuvey said in a report obtained by Trend.

For now, these measures only apply for the remainder of this fiscal year, but they may well set the tone for 2016, he noted.

"These measures provide the first evidence that policy in the Kingdom is now being adjusted to match the new reality of cheap oil," Tuvey said.

And given the heavy reliance on government spending to fuel the economy, this simply reinforces the view that growth will slow over the coming years, according to the economist.

Oil prices have been experiencing dramatic fall since the middle of 2014. The position of Saudi Arabia, which is the largest producer and exporter within OPEC, has been an obstacle in cartel's quota reduction, which could have somehow stabilized oil prices.

The International Monetary Fund expects Saudi government spending in 2015 to remain elevated despite a sharp decline in oil prices which could put pressure on government finances, resulting in a surge in fiscal deficit. Saudi Arabia's government is projected to run a fiscal deficit of about 20 per cent of GDP in 2015, according to IMF.

Real GDP growth is projected to slow to 2.8 percent this year, and then further to 2.4 percent in 2016 as government spending begins to adjust to the lower oil price environment.

Azerbaijani Finance Ministry places short-term bonds on auction
Azerbaijani Finance Ministry places short-term bonds on auction
Iran’s Bahar Azadi gold coin price again falling
Iran’s Bahar Azadi gold coin price again falling
Liabilities of Bank Melli Iran’s Baku branch increase
Liabilities of Bank Melli Iran’s Baku branch increase
Loading Bars
Latest
Moscow, Tehran attach great importance to North-South Corridor – Russian FM
Azerbaijani president gives weighty answer to Armenia’s disinformation campaign - Official (VIDEO)
Belarus reveals plans for oil purchases from Azerbaijan
Kazakhstan’s FlyArystan launching direct flights to Georgia
Iran's Energy Exchange announces products to be on sale on April 14
International Bank of Azerbaijan opens tender to buy printed materials
Azerbaijan's Aghdam needs to be fully rebuilt - German historian (VIDEO)
Azerbaijan's PM meets with BP's regional president
Ukraine may take part in restoration of Azerbaijan's liberated lands
Azerbaijani Finance Ministry places short-term bonds on auction
Iron ore concentrate production by major Iranian companies increases
President Ilham Aliyev: Pakistan was among countries that openly supported Azerbaijan from first days of confrontation
Iran’s Bahar Azadi gold coin price again falling
Sudan due to send first delegation to Israel next week
Liabilities of Bank Melli Iran’s Baku branch increase
Armenia obligated under int'l law to provide mine maps to Azerbaijan - Matthew Bryza
Footage from Azerbaijani Jabrayil's Sadi village (VIDEO)
Azerbaijan, Ukraine discuss full resumption of mutual flights
Oil exports via Barents Sea in Lukoil system increased
Hydrometeorology in Azerbaijan needs young experts for technologies - ministry
Azerbaijan shares latest data on mine clearance work carried out on liberated lands
Co-op between Iran, Russia to be effective in activating nuclear deal – Rouhani
2021 demand for OPEC crude to be higher than in 2020
Assets of Iranian Bank Melli's branch in Azerbaijan increase
On Independence Day eve Israel's population over 9.3m
Iran still waiting for S.Korea to provide solution, release its blocked assets
Azerbaijan issues data on number of COVID-19 vaccinated citizens
Azerbaijan confirms 2,457 more COVID-19 cases, 2,002 recoveries
OPEC revises up forecasts for Azerbaijan’s 2021 liquids supply
Rosatom can take part in developing green energy in Azerbaijan - expert
Repairing of last well in Iran's Naft Shahr field launched
Iran in favor of strengthening relations with Russia – President Rouhani
Azerbaijan Railways builds co-op on transiting additional goods
IMF talks forecast of money supply growth in Azerbaijan for 2021-2022
European Hydrogen Backbone’s updated cost revealed
IMF predicts growth for Azerbaijan's oil, non-oil GDP
Cargo movements in Iran’s Qeshm port down
Azerbaijan expects tourism sector to recover by summer
Plan on budget revenues surpassed in Kazakhstan
Scotland to ease some COVID-19 restrictions early
Around 70% of European infrastructure to start transporting hydrogen
U.S. will base 500 additional troops in Germany
Russia documents 8,173 coronavirus cases in past day, lowest figure since September 28
Kazakhstan names value of payments of compulsory vehicle insurance
Iran's mobile phone imports increase
Azerbaijani president signs order on hosting European Football Championship matches in Baku
Kazakhstan drafts pricing rules for exported crude oil, gas condensate
Retail trade indicators decrease in Kazakhstan
Kazakh Gas Refinery opens tender to buy spares
Kazakhstan records decrease in oil output
Belarusian IT company keen to expand its activities in Azerbaijan's transport sector
Iran’s Jam Petrochemical Company announces its production plan
Uzbekistan building modern wastewater treatment facility at Uzbekneftegaz GTL plant
Kazakh Gas Refinery opens tender to buy engines
Russian, Azerbaijani military discuss Iskander-M missile debris in Karabakh region - Russian official
Greece can take slightly more than 1 mcm/d via TAP
President Ilham Aliyev: Liberation of territories will be additional opportunities
President Ilham Aliyev: Armenians did it deliberately in order to erase legacy of Azerbaijani culture in order to erase these territories from our memories
Together with Russian president, we discussed issue about Iskander-M missile – Azerbaijani president
TAP supplies to Greece cause contraction in LNG imports
Kazakhstan attracts investments to develop national parks in Almaty region
European Commission makes statement on TAP
Russia’s Federal Air Transport Agency allows flights from Irkutsk to 3 countries
President Ilham Aliyev: I had a strong feeling during negotiations that Armenia doesn’t want a solution
President Ilham Aliyev: I think we need to be more active in order to try to build bridges
ADB focuses on renewable energy projects in Georgia
US eyes to continue negotiations on direct flights with Georgia
Bank of Georgia discusses revised outlook for country’s economic growth in 2021
Anabechdi company plans to produce textile in Georgia
Georgia to receive significant funds from IMF
Azerbaijan reveals 2M2021 data lending to energy, chemistry, natural resources sector
Georgian E-Space company looks to export its software
Death toll from coronavirus pandemic in Iran exceeds 65,000
Amount of Georgian bonds held by foreign investors up
JSC "Georgian Railway" reveals financial indicators for 2020
Uzbekistan, Russia discussing joint projects on aircraft construction
Iran's propane gas exports shrink
Armenia committed ecological terror during occupation of Azerbaijani lands - Ecology ministry
India, EU reiterate commitment to democracy, freedom and respect for human rights
Bangladesh: Multinational military exercise 'Shantir Ogroshena 2021' concludes
Turkey’s export of grains, legumes to Iran jumps
PM Modi to inaugurate virtual Raisina Dialogue, 50 countries to participate
US to support Georgian farmers, small business owners through agrotourism
External merchandise trade down in Georgia
New buildings of Turkmen Turkmenbasy, Senagat banks opened
Turkey's 1Q2021 export of chemical products sees increase
Iran's polyethylene exports rise
Georgia assists new ferroalloy enterprise in Terjola through "Produce in Georgia" program
Azerbaijan issues data on compulsory non-life insurance for Feb.2021
Foreign currency demand of Azerbaijani banks rebounds
Azerbaijan's revenues from customs duties increase
Azerbaijan's Feb.2021 lending to agriculture grows
Azerbaijani Customs Committee increases transfers to state budget for March 2021
Air France-KLM prices capital hike at 4.84 euros per share
Value of Uzbekistan's 1Q2021 import of Turkish ready-made clothes up
Volume of loaded, unloaded cargo in Iran’s Amirabad port decreases
Iran boosts pistachio exports
Azerbaijan to restore hydrological observation network in liberated Karabakh
Iran declares data on methanol exports
Iran ta launch several water and electricity facilities
All news