The economic expert in the Middle East and North Africa at BNP Paribas, Mohamed Abdel-Majeed, said that achieving the Saudi budget surplus in the current year will be difficult in light of the voluntary reduction in oil production.
Abdul Majeed added, in an interview with Al-Arabiya, that the deficit will not be large this year, in light of the fact that the basic dividends from “Aramco” are fixed and represent a third of the oil income of the Saudi government, which gives a kind of relative stability to the levels of income in the budget.
He stated that the Saudi budget deficit in the current year will be small, thanks to the additional distributions approved by Aramco.
According to a recent report issued by “BNP PARIBAS”, that Saudi Arabia’s application to reduce its oil production to about 9 million barrels per day in July may lead to the Saudi budget recording a slight deficit during the current year due to the decline in oil revenues.
The bank expected the Saudi budget to record a deficit of 2.9% of GDP, which accounts for the fixed dividends announced by Aramco, but excludes any performance-related dividends.
As for when calculating the additional distributions, the expected deficit shrinks to 1% of the economy, noting that the Saudi budget 2023 expects a small surplus representing 0.4% of GDP.
BNP PARIBAS estimated that the production cut raised the oil price required to equalize expenditures and revenues in the budget to $84 a barrel from $77 before the production cuts.
Abdul Majeed believes that the rise in the price of a barrel of oil is due to the continued cuts in Saudi oil production since last October until now.
Abdul Majeed expected that the break-even price of a barrel of oil would drop below $70 a barrel within 3 years, taking into account the high levels of oil production once again and the stabilization of government spending.
oil markets
With regard to the oil markets, Abdul Majeed said that demand is weak in the markets at the same time there is a large supply, so “OPEC +” has made successive cuts since October 2022, in addition to European-American sanctions on the Russian oil sector that would cut Russian oil production in half. The second this year.
He added that the markets are about to go into the holiday season and then the winter season, which may increase the demand for oil, and there may be a shortfall in oil supplies by 500 thousand barrels to one million barrels per day in the second half of this year, which supports the rise in oil prices to levels of $ 90 a barrel in the fourth quarter. from this year.
Egypt’s credit rating
Regarding the expectations of Moody’s downgrading Egypt’s credit rating, Abdel Magid stated, “It is not possible to predict what Moody’s review will end, but even if Egypt’s credit rating is downgraded, Egyptian bonds are now traded in the secondary market at (-CCC), therefore There will be no shock to the investor if Egypt’s rating is downgraded.”
