Saudi Arabia is predicting that its budget deficit will balloon to US$50 billion next year as low oil prices and lowered production eat into the Kingdom’s oil revenue, according an official budget released Monday by the Saudi Arabian government.
The anticipated 2020 budget deficit would be up $15 billion on 2019 and will come even as Saudi Arabia plans to cut spending next year by 7.8%, to $272 billion. Revenues are expected to be down by 14.6%, according to the official statement.
The 2020 budget deficit will next year, then, be 6.5% of its gross domestic product, up from 4.7% in 2019.
The increase to the oil-rich Kingdom’s budget deficit comes as no surprise, as oil prices have fallen sharply from the days of $100 oil, and its oil production has taken a huge hit over the last year as it tried to do most of the production cutting for other members who were not quite as diligent with the cuts. Next year, too, is expected to see even less oil production for the Kingdom, with Saudi Arabia agreeing to even lower production figure, and then offering to produce 400,000 bpd less than that figure.
The hope is that these extra production cuts will lift the price of oil to a level that will make up for the lower production—although that has hardly been the case for 2019.
Estimated oil revenue for 2020 is 513 billion riyals, according to its budget by presented by Reuters, or US$136.8 billion. For comparison, Saudi Arabia’s 2019 oil revenue is projected to be 602 billion riyals.
Reducing Saudi Arabia’s dependency on oil is the backbone of its Vision 2030 reforms.