JEDDAH: Fiscal consolidation, coupled with improved non-oil revenues, will mean a smaller-than-anticipated fiscal deficit in Saudi Arabia in both 2016 and 2017, according to economists.
In their latest macroeconomic update, researchers from Jadwa Investment have also revised some of their 2016 and 2017 forecasts to take into account the recent set of fiscal reforms and economic data.
“Since the start of 2016, and in line with targets specified in the National Transformation Program (NTP 2020), prudent policies to reform the fiscal budget have been taken,” said Fahad Alturki, chief economist and head of research at Jadwa Investment in Riyadh.
The commencement of an international sovereign bond issuance program will have a dual benefit of protecting FX reserves and reducing pressure on domestic liquidity, according to the Jadwa report.
The Jadwa economists expect the Ministry of Finance to take steps to gradually register, list and trade government debt instruments on the Saudi stock exchange, thereby establishing a benchmark yield curve. “Meanwhile, the current account deficit is also forecast to be smaller than anticipated, mainly due to lower-than-expected value of imported goods and services,” said the report.
“Along with the international bond issuance, several other efforts by the government have halted the sharp rise in the cost of funding, as interbank rates have stabilized recently,” said the economists.
“Despite the hike to energy prices at the end of 2015, inflation continued on a decelerating trend, which we believe is reflective of the slowdown in consumption,” they said.
The Jadwa researchers expect Saudi Arabia’s economic performance to remain positive for the remainder of 2016.
“We forecast overall GDP growth to reach 1.1 percent and 0.6 percent in 2016 and 2017, respectively, with oil sector GDP growing by 2.1 percent and 0.6 percent over the next two years,” said the economists.
Non-oil GDP is forecast to reach 0.3 percent and 0.5 percent during the same period, they said.
“The contribution of oil production to annual economic growth is likely to remain on the positive side. Albeit at a slower pace, we expect private sector growth to remain positive at 0.7 percent, as the recent moderation in credit growth is expected to ease following the recent issuance of international sovereign bonds and the resumption of government payments,” said the Jadwa report.
Business surveys point toward an expansion in the non-oil private economy in 2016, with the non-oil purchasing managers’ index averaging 54.8, year-to-October, slightly down from the full-year average of 56.7 in 2015. Year-on-year growth in broad money supply (M3) turned positive in October for the first time since the start of 2016, according to the report.
Saudi economic performance to remain positive this year
Saudi economic performance to remain positive this year
US pump prices surge as Iran war upends global energy supply
- Fuel prices jump over 10 percent as oil prices surge
- Analysts predict further price rises due to market conditions
MARIETTA/NEW YORK : US retail gasoline and diesel prices are soaring as the US-Israel war with Iran constrains oil and fuel exports, which could be a political test for President Donald Trump’s Republican Party ahead of midterm elections in November.
Fuel prices jumped more than 10 percent this week as oil rose above $90 a barrel, its highest in years, adding pain at the pump for consumers already strained by inflation.
Trump on Thursday shrugged off higher gasoline prices in an interview with Reuters, saying “if they rise, they rise.”
The president had vowed to lower energy prices and unleash US oil and gas drilling during his second term, but much of his tenure has been marked by volatility and uncertainty amid shifts in policies like tariffs and geopolitical turmoil.
The US is the world’s largest oil producer. It is a major exporter but also imports millions of barrels a day since it is the world’s largest oil consumer.
As of Friday, the national average prices for regular gasoline stood at $3.32 a gallon, up 11 percent from a week ago and the highest since September 2024, according to data from the motorists association AAA. Diesel was at $4.33, up 15 percent from a week ago, surging to the highest since November 2023.
Midwest, south feel the pinch
US motorists in parts of the Midwest and the South, including states that supported Trump, have seen some of the steepest increases in fuel costs since the conflict in Iran started.
In Georgia, a swing state, average retail gasoline prices rose 40.1 cents a gallon over the past week, according to fuel tracking site GasBuddy.
Andrenna McDaniel, a health care insurance worker in South Fulton, Georgia, said she was surprised to see prices skyrocket overnight.
“They jumped up so quickly,” she said on Friday, adding that she does not agree with the war at all.
McDaniel, a Democrat, said that for now she is only driving for the most important things, and feels lucky that she works from home so she does not have to drive as much as other people do. Georgia voted for Donald Trump in the 2024 election.
Trump voter Richard Soule, 69, a US Air Force veteran and a retired firefighter, said a little pain at the pump is worth Trump’s efforts to protect America.
“When President Trump went in there and bombed out their nuclear, and they just thumbed their nose at it, I believe he did the right thing at the right time,” Soule said on Friday as he filled up his Ford F-150 truck in Marietta, Georgia.
Other states, including Indiana and West Virginia have seen prices rise by 44.3 cents and 43.9 cents, respectively.
Prices may rise further
More pain may be on the way, analysts said, as oil prices continue to trend upward. On Friday, US oil futures settled at $90.90 a barrel, up nearly $10 and the biggest single-day rise since April 2020.
“Given current market conditions, the national average price of gasoline could climb toward $3.50 to $3.70 per gallon in the coming days if oil continues rising and supply disruptions persist,” GasBuddy analyst Patrick De Haan said.
The disruptions in the Middle East and the Strait of Hormuz, a key trade conduit, have boosted demand for US oil abroad, which in turn has driven up prices for domestic refiners too.
“The US has weaned itself off of its dependence on Middle Eastern crude, but obviously Asian refineries, and to a lesser extent, European refineries have not,” Denton Cinquegrana, chief oil analyst with OPIS. “That’s what you’re seeing happen in the spot market, because the demand for US exports rise, and so the price rise.”
Seasonal factors could add further pressure. Gasoline prices typically go up in the spring and peak in the summer due to higher gasoline demand and production of summer-blend gasoline, which is more costly to produce. Diesel fuel saw an even more aggressive jump since Iran began retaliating against US and Israeli strikes, significantly disrupting shipping in the Strait of Hormuz.
Global diesel inventories have remained in tight supply due to heavy demand for heating and power generation during a prolonged winter in the US and other parts of the world and a structural tightness of refining capacity. Sticker prices of everything from food to furniture go up when the cost of diesel goes up, as the fuel is mainly used in freight transportation, manufacturing, agriculture, and global shipping, analysts said.
“In a world where buzzword seems to be ‘affordability’, that is certainly not going to help,” Cinquegrana said.
