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Saudi Arabia reports first quarterly budget surplus since 2014

RIYADH (Reuters) - Saudi Arabia’s finance minister said on Wednesday the kingdom recorded a budget surplus of 27.8 billion riyals ($7.41 billion) in the January-March period, its first since oil prices plunged in 2014.

Saudi Minister of Finance Mohammed al-Jadaan speaks during financial sector conference in Riyadh, Saudi Arabia April 24, 2019. REUTERS/Stringer.

The finances of the world’s largest oil exporter were hit hard by the slump in crude prices, which led to a deficit of 367 billion riyals, or about 15 percent of gross domestic product (GDP), in 2015.

Last year the kingdom, which has pledged to eliminate the deficit by 2023, ran a shortfall of 136 billion riyals, or an estimated 4.6 percent of GDP, down from 230 billion a year earlier.

The first-quarter surplus is something of a surprise, said Abu Dhabi Commercial Bank (ADCB) Chief Economist Monica Malik. “Based on crude price and production data, we expected a drop in oil revenues.”

Saudi Arabia would need oil priced at $80-$85 a barrel to balance its budget this year, an International Monetary Fund official told Reuters in February.

Oil prices have risen anew, hovering around six-month highs on Wednesday with Brent crude futures at $74.57 per barrel. Crude prices have risen since the United States said on Monday it would end all exemptions for sanctions against Iran, demanding countries halt oil imports from Tehran from May or face punitive action.

Finance Minister Mohammed al-Jadaan told a financial forum that oil revenue rose to about 149 billion riyals in the first quarter from around 114 billion riyals in the same period last year, while non-oil revenues grew to 76.3 billion riyals, up from 52.3 billion riyals.

In the first quarter of last year, Saudi Arabia recorded a deficit of 34.3 billion riyals as the economy emerged from a recession in 2017 - the first time it had shrunk since the global financial crisis nearly a decade earlier.

The government had projected a deficit of 131 billion riyals this year, marginally lower than the 136 billion riyals of 2018.

After years of fiscal consolidation and weak growth, Riyadh plans to increase state spending by 7 percent in 2019 to an all-time high of 1.106 trillion riyals to spur growth.

Expenditure in the first quarter amounted to 217.6 billion riyals, Jadaan said, slightly higher than last year.

($1 = 3.7500 riyals)

Writing by Davide Barbuscia and Alexander Cornwall; Editing by Hadeel Al Sayegh and Mark Heinrich