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Saudi Arabia’s budget deficit widened in the second quarter as officials ramp up spending to stimulate a sluggish economy.
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The budget gap of 33.5 billion riyals ($8.9 billion) compared to 7.4 billion riyals in the same period last year, the Finance Ministry said in a statement on Tuesday.
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Spending rose 5% from the second quarter last year, with significant jumps in capital spending and outlays on subsidies and social benefits. Oil revenue dropped 5% year-on-year and non-oil revenue declined 4%.
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The data suggests that a long-promised injection of government cash is finally materializing as officials try to boost economic growth in the world’s largest oil exporter.
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Gross domestic product is expected to grow 1.7% this year, a second year of expansion after contracting 0.7% in 2017, according to data compiled by Bloomberg.
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“A key positive trend is the pickup in capital expenditure, which points to some progress with investment activity and is likely to be in line with a wider trend,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “We are starting to see this shift.”
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Capital spending reached 61 billion riyals in the second quarter, a 27% annual increase that the Finance Ministry attributed to “the implementation of housing projects and other development projects.”
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Subsidy spending rose 71% as the government provided support to small businesses, the ministry said.
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The period also saw greater spending on social protection programs, including social security, student bonuses, a cost-of-living allowance for government employees and the “Citizens’ Account” program that gives poor and middle-income Saudis cash to offset the impact of austerity measures, according to the statement.
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A decline in non-oil revenue — which has generally been rising since the government implemented a fiscal reform plan — was mostly due to a 37% drop in “other revenues,” which the ministry didn’t elaborate on. Revenue from taxes on goods and services was up 23%.
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