(Adds details, analysis)
RIYADH Dec 22 Saudi Arabia said on Thursday it
had successfully cut into its huge state budget deficit this
year and will increase government spending in 2017 to boost
flagging economic growth.
The deficit shrank to 297 billion riyals ($79 billion) in
2016. That was well below a record 367 billion gap in 2015, and
below the government's projection in its original 2016 budget
plan of a deficit of 326 billion riyals.
"Our economy, thank God, is sturdy and it has enough
strength to cope with the current economic and financial
challenges," King Salman said in a nationally televised address
to introduce the budget for 2017.
The financial challenges for Saudi Arabia stem largely from
the fall in the global price of oil over the past 2-1/2 years.
It is not yet been announced how the 2016 deficit stacks up
as a percentage of the economy. It was 15 percent of GDP in
The drop in the deficit is nonetheless likely to reassure
international investors worried about Saudi Arabia's ability to
cope with an era of cheap oil. The riyal came under speculative
pressure this year but currency jitters have eased in recent
Riyadh slashed spending on infrastructure and perks for
civil servants to get its finances under control. For the first
time in years, it kept its spending below its original budget
projection in 2016; actual spending was 825 billion riyals
compared with a projection of 840 billion riyals.
Revenues came in slightly higher than expected at 528
billion riyals instead of 514 billion riyals as the government
raised cash with steps such as higher municipal and visa fees.
In its 2017 budget plan, Riyadh said it would increase
spending to 890 billion riyals from the 840 billion riyals
originally projected for 2016. But next year's deficit will
shrink further to 198 billion riyals because of higher oil
prices and non-oil revenues, the government said.
Economic growth slowed to 1.4 percent in 2016, far below the
average of 4 percent in the past decade, as austerity measures
hurt consumers' income and deterred private companies from
investing - even though their investment is vital to diversify
the Saudi economy beyond oil in the long term.
By increasing state spending on infrastructure, the 2017
budget aims to support economic growth, while a new system of
cash payments to poorer citizens will offset the impact on them
as the government gradually raises domestic energy prices to
reduce its subsidy burden, the finance ministry said.
It gave no details of the planned subsidy cuts.
(Reporting by Marwa Rashad and Reem Shamseddine in Riyadh and
Hadeel Al Sayegh in Dubai; Writing by Andrew Torchia Editing by