Saudi Arabia: seeking security (catch all)

[Firn]

A while ago we talked about basic math and today's budget is an interesting exercise in it:

DEFICIT

The government forecasts the deficit will narrow to 326.2 billion riyals ($87 billion) in 2016, from 367 billion riyals [~$100bn] this year.

The 2015 deficit is about 16 percent of gross domestic product, according to Alp Eke, senior economist at National Bank of Abu Dhabi. The median estimate of 10 economists forecast a shortfall of 20 percent of GDP this year, according to data compiled by Bloomberg.

Beyond oil by McKinsey has a good, if somewhat constrained, executive summary with stunning stats and graphs. Among those gems is the amazing fact that private sector's part in the 75% household income growth in the last decade was less then 1%. Lots of other good graphic stuff...

A DECADE OF RISING PROSPERITY FUELED BY OIL

The Saudi economy moved up from being the 27th largest in the world in 2003 to become the 19th largest in 2014. Its nominal GDP of about $750 billion is larger than either Switzerland’s or Sweden’s. On a per capita basis, Saudi Arabia’s nominal GDP of about $24,000 is a little behind South Korea’s and ahead of Portugal’s, although the unique features of the Kingdom, including a sizable population of migrant laborers and a huge oil sector, make this figure misleading.

Saudi Arabia is the world’s largest oil exporter, deriving about 90 percent of government revenue from oil. The sharp increases in oil prices, which rose from about $30 per barrel in 2003 to a sustained peak of about $110 per barrel in 2011 to 2013 before dropping back in 2014, fueled a doubling of GDP during the decade. At a time of growing indebtedness across major developed and emerging economies since the 2008 financial crisis, Saudi Arabia has been a rare exception: the Kingdom eliminated national debt and increased
reserve assets to $732 billion, the equivalent of almost 100 percent of GDP in 2014.

Now the state's oversea funds are decreasing to cover together with bonds the $100bn or 16% deficit. Roughly $120bn of it's revenue came according to that article from oil, ~ 75% of it's total. Such relations make your head spin. In short Saudi Arabia has a huge problem stemming from those factors:

a) The economy is totally dependent on oil revenue which in turn props up the vast public sector
b) Expenditures have been rising rapidly along with a rapidly rising population
c) The little productive offical private sector has been crowded out and is dominated by foreigners

Oil revenue had to grow considerably per annum already in 2013 over the next decade to keep up with expenditure trend. Even oil at $100 wasn't enough going forward ten years, with Saudi energy consumption cutting ever more into it's exports and thus revenue.

So far for 2016 they calculate, at least according to the Bloomberg numbers, higher oil revenue then in 2015. Keep in mind that oil prices have been up to 40% for quite some time higher this year then they are now. They might of course shoot up again despite the supply glut but it is still a surprising to see that projection...