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Saudi Arabia expects wider deficit in 2020 due to low oil price, coronavirus

Saudi Arabia expects wider deficit in 2020 due to low oil price, coronavirus

Saudi Arabia’s budget deficit in 2020 could expand to as much as 9 percent of its GDP due to plunging oil prices and losses to businesses as a result of the coronavirus, the kingdom's finance minister said.

In a news broadcast on Saudi state TV, Mohammed al-Jadaan said that the government has a contingency plan in place and flexibility due to spending cuts, borrowing and tapping reserves.

 In October 2019, Jadaan had said that the kingdom expected its budget deficit to widen to 6.5 percent of GDP in 2020. 
 

Saudi Arabia will look to increase its borrowing this year to finance a deficit which Jadaan estimated could widen to a maximum of 7 percent to 9 percent by the end of the year, Reuters reported.

"We have huge reserves and very large investments, but we don't want to liquidate any of these so we will borrow ... I don't expect the deficit by the end of 2020 to exceed 7 percent to 9 percent, and this is our target," Reuters quoted Jaddan as saying.

"We don't expect (borrowing) to exceed 50 percent until 2022 and this year we don't expect borrowing to exceed 100 billion riyals and it could be less," Jadaan said.

On Friday, the largest economy in the Arab region announced stimulus packages totaling to 120 Saudi billion riyals ($32 billion) to offset the impact on businesses due to the coronavirus. The relief package includes a 50 billion riyal ($13.3 billion) package announced last week to support small and medium-sized businesses.

According to Friday's announcement, 70 billion riyals has been allotted to support businesses. The various measures include the postponement of tax payments and exemptions of various government taxes and fees.

Source: Zawya

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