Today for your consideration we present a Samba report on the Saudi economy, "Saudi Arabia's 2007 Budget, 2006 Performance."  The report is the latest in a series of insightful documents prepared by the office of Samba's Chief Economist Brad Bourland. [Links to previous reports and related items below.] This SUSRIS IOI provides the summary from the Samba report and links to the complete document.

We thank Samba and Mr. Bourland for producing these informative reports and allowing us to share them with you.

Summary

On Monday, December 18, 2006 the Council of Ministers endorsed the government's budget for fiscal year 2007 (31 Dec. 2006 - 30 Dec. 2007) and announced economic and fiscal results for 2006. With oil revenues assumed to remain strong, the budgetary focus on enhancing expenditure on education, healthcare and infrastructural development as well as reducing debt is maintained. The highlights are:

• A budget surplus of SR 265 billion ($70.7 billion) was recorded in 2006 due to spending of SR 390 billion ($104 billion) and revenues of SR 655 billion ($174.7 billion). The surplus was nearly five times larger than the surplus of SR 55 billion ($14.7 billion) projected in the 2006 budget, which was based on expenditure of SR 355 billion ($89.3 billion) and revenues of SR 390 billion ($10.4 billion). Oil receipts well in excess of target boosted revenues and allowed spending to grow beyond the budget. The bulk of the surplus was used to increase central bank foreign assets and repay debt.
  

• For 2007, spending is budgeted at SR 380 billion ($101.3 billion) compared to revenues of SR 400 billion ($106.7 billion), resulting in a projected surplus of SR 20 billion ($5.3 billion). Our preliminary forecast is that actual expenditures and revenues will exceed their budgeted levels and another substantial budget surplus is likely.
  

• Preliminary data show that economic performance remained healthy in 2006. Real GDP growth slowed to 4.2 percent owing to a fall in oil production in the second half of the year. Nonoil private sector growth was 6.3 percent. Inflation rose to an 11-year high of 1.8 percent from 0.4 percent in 2005. We expect further inflationary pressure in 2007.

In line with past practice, it appears that the budget is based on conservative oil price and revenue assumptions. A Samba-estimated average price for Saudi oil of $42.5 per barrel at an average 2007 production of 8.9 million barrels per day (b/d; current production is 9.1 million b/d) would meet the budget projection. The 2007 budget is set to impart a significant stimulus to the economy. With private sector investment strong, 2007 is likely to be another year of healthy economic performance, though this may be masked somewhat by a weaker oil market.

Complete Report - Click Here (PDF)

Related Items:

• Samba Economy Watch - Office of the Chief Economist

• The Saudi Economy at Mid-Year 2006 - Office of the Chief Economist, Samba - SUSRIS IOI - Oct. 13, 2006

• Saudi Arabia's Accession to the WTO: Is a "Revolution" Brewing? - Middle East Policy Council Capitol Hill Conference Series on US Middle East Policy - Introduction by Ambassador Chas Freeman - SUSRIS IOI - Jan 22, 2006

• The Saudi and Gulf Stock Markets: Irrational Exuberance or Markets Efficiency? - Khalid R. Al-Rodhan - SUSRIS IOI - Dec. 21, 2005

• Saudi Arabia's 2006 Budget, 2005 Economic Performance - SUSRIS IOI - Dec. 16, 2005

• Saudi Arabia Economic Update - An Economy Watch Report From Samba - SUSRIS IOI - Nov. 3, 2005

• Saudi Economic Performance: A Conversation with SAMBA Chief Economist Brad Bourland - SUSRIS Interview - Feb. 27, 2005

• WTO Accession: One Step Closer - SUSRIS IOI - Oct. 12, 2005

• World Trade Organization Accession: Saudi Arabia Gets "Green Light" - SUSRIS NID - Oct. 28, 2005

• SUSRIS Topic Section - Saudi Arabia's Accession to the WTO

• The Implications of WTO Membership: A View from the Kingdom - SUSRIS IOI - Oct. 30, 2005

• World Trade Organization Accession - SUSRIS IOI - Nov. 10, 2005

• Arab World Economies: Prosperity Amidst Political Uncertainty - Brad Bourland - SUSRIS IOI - Sep. 23, 2004

Brad Bourland, CFA 

Since 1999 Brad has been the Chief Economist at Samba Financial Group, formerly Saudi American Bank, in Riyadh, where he publishes regularly on issues related to the Saudi and global economies and the world oil market. He appears frequently in the domestic and international media and is a regular public speaker. Brad is also head of country risk management for the bank, which involves managing the bank's cross-border risks. Before joining Samba, Brad spent an 18-year career as diplomat, economist, and manager with the U.S. Department of State. During the last three years of his diplomatic career he was in Riyadh as the American Embassy's First Secretary responsible for financial affairs, where he analyzed the Saudi economy for the U.S. Government and conducted financial aspects of US-Saudi relations. Brad has his BA and MA magna cum laude from the University of Utah, and is a CFA (Chartered Financial Analyst) charterholder.