Oil giant, Saudi Arabia, records $29bn deficit in Q2 as oil demand continues to fall

World oil-producing giant, Saudi Arabia, has recorded an oil revenue deficit of $29 billion for the second quarter of the year due to continued drop in oil prices and oil demand, which affected the incomes of oil producing and exporting countries.

A Reuters report monitored by Business A.M. revealed that the country’s oil incomes for April to June fell by 45 per cent, with the total budget incomes falling 49 per cent in the past a year past.  Although, Saudi Arabia has taken some austerity strides as of now trying to get control over public spending and alleviate the effect of the oil emergency on its economy, but it now appears to be that more would be required, the agency reports.

Monica Malik, chief economist at Abu Dhabi Commercial Bank, is quoted by Reuters as commenting on the deficit thus: “A pullback in spending is basic for containing the deficiency. The proactive position of the government was at that point reflected in the severity measures declared in April. In any case, these will dampen the recuperation outlook.”

So far this year the Saudi government has declared a cut in 2020 spending of $13.2 billion through “a partial decrease in certain things with the least social and economic impact,” alongside significantly increasing value-added tax to 15 per cent from 5 per cent, and a suspension of the purported cost-of-living stipends for all Saudi public officials, who are most of Saudis in employment.

Those familiar with the issue, while commenting, said the issue with these austerity measures is that they may slow down the economy’s recovery once the emergency crisis is finished. What’s more, the way that the Kingdom had fashioned plans to borrow in order to get past the most exceedingly awful part of it isn’t helping either, on the grounds that loans should be repaid.

For the time being, there is a solid enthusiasm for Saudi debts, but, to be sure that we are indeed past the peaks of oil demand, this may change after a short time. So far this year, Saudi Arabia has borrowed nearly $13 billion on the international and local markets.  Meanwhile, the IMF anticipates that Saudi Arabia’s economy should shrink by 6.8 per cent this year with the Kingdom itself calling the figure negative.