Saudi spending to exceed 2012 budget, but surplus likely

Spending by the Kingdom of Saudi Arabia in 2012 will likely be higher than budgeted, but the country will still run a fiscal surplus of 4 percent of GDP, says Fitch Ratings. Spending growth will moderate in 2012 compared with last year. In 2011, spending growth reached 24 percent, the highest in a decade. The government raised public sector wages, created government jobs, injected capital into state-owned lenders and pledged more resources for housing. Capital spending - mainly on infrastructure - exceeded 12 percent of GDP. Saudi budgets typically underestimate both revenue and spending. In 2002-2011, central government spending exceeded the budget by an average of 24.8 percent. But in each year other than 2009, oil prices lifted revenues beyond expectations, giving the government room to spend more without running a deficit. In its National Budget released December 26, the Ministry of Finance projected total revenues of SAR 702 billion ($187.2 billion) and government expenditure of SAR690 billion, giving a surplus of SAR12 billion. Meanwhile, Saudi Arabia has not raised the price of gas supplied to petrochemical firms in the kingdom, Saudi oil minister Ali al-Naimi was quoted on Thursday as saying. Naimi said prices of feedstock gas to the petrochemical industry will remain stable for the time being, according to Saudi newspaper al-Watan’s website. In Saudi Arabia, the price of ethane is set far below international prices at 75 cents per million BTUs, which has helped spur cheap expansion by petrochemical firms including Saudi Basic Industries Corp (SABIC). Asked about current demand for the kingdom’s crude oil, Naimi said that demand is between 9 and 10 million barrels per day (bpd), while the kingdom\'s production capacity is over 12.5 million bpd.