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Saudi Arabia needs oil prices to be higher than what US President Donald Trump may be comfortable with as the government increases spending to bolster economic growth.
International Monetary Fund data released yesterday show the world’s biggest oil exporter needs prices at about $85 a barrel to balance its budget this year. up from a forecast of $73 in September.
The estimates highlight the tricky task facing Crown Prince Mohammed bin Salman as he tries to forge closer ties with Trump and. at the same time. finance a plan to revive economic growth and create jobs at home.
The kingdom. which reiterated last week its commitment to balance its books by 2023. plans to increase spending by 7% this year. Trump has repeatedly called on OPEC to keep oil prices low. He tweeted on Friday that he had spoken to Saudi Arabia and other suppliers about boosting oil flows.
Many of OPEC`s biggest producers and partners outside the group are poised to post a government budget surplus if oil prices gain from the average $62 a barrel so far this year.
Saudi Arabia expects its budget deficit to narrow to 4.2% of gross domestic product this year from 4.6% in 2018. a target economists say hinges on higher oil prices.
“Saudi Arabia’s fiscal break-even could be as high as $95 per barrel this year. but the IMF is probably assuming higher cash transfers from Saudi Aramco to the Ministry of Finance.’’ said Ziad Daoud. Bloomberg’s chief economist in the Middle East.
