Saudi shortfall narrows in 2017

Preliminary outcomes for Saudi Arabia's 2017 fiscal year were released late last night, showing that the shortfall narrowed to 8.9 percent of GDP, well below our 12.8 percent forecast.

By Daniel Richards

Preliminary outcomes for Saudi Arabia’s 2017 fiscal year were released late last night, showing that the shortfall narrowed to -8.9% of GDP, well below our -12.8% forecast and down from 2016. The 2018 Saudi budget will reportedly be approved by the Council of Ministers today, and this will be followed by a press conference reporting the priorities and key figures. We are expecting the 2018 budget plan to show a further narrowing of the overall deficit. On the revenue side, higher expected oil prices will help and non-oil revenue should rise as well relative to 2017 on the back of recently introduced taxes and VAT. We expect total spending to rise slightly next year, as cuts to subsidies will likely be offset by increased spending in other components of the budget.

The UK’s CBI manufacturing survey was released yesterday, with orders remaining at the highest levels seen since 1988. The factory index stood at 17 for the second month running, exceeding analyst expectations of 15. The UK manufacturing industry has been benefitting from the positive effect on exports of a weaker pound since the Brexit vote, coupled with a more general resurgence in global trade. Export orders fell from 20 in November to 16 this month, but remain significantly higher than seen long-term averages. Motor vehicles and transport equipment have seen particularly strong demand.

In South Africa, it was confirmed last night that Deputy President Cyril Ramaphosa had defeated Nkosazana Dlamini-Zuma in the contest to succeed President Jacob Zuma as the next leader of the ruling African National Congress (ANC). Ramaphosa won the close-run contest by 2,440 votes to 2,261, and will most likely be South Africa’s next president following 2019 elections. Ramaphosa’s promises of tackling corruption and revitalising the economy have found favour with investors, and the rand strengthened to a six-month high on the news.