Saudi Arabia's budget for 2012 is conservative on both spending and income, reflecting an-age old conscious policy choice. But if the year 2011 is any guide, final figures would be notably higher than the projected ones.

In fact, projected revenues and expenditures for fiscal year 2012 are lower than actual statistics for 2011. As such, income and spending for 2012 are put at $187 billion (Dh686.9 billion) and $183.8 billion, thereby allowing for a limited surplus of $3.2 billion. In comparison, all but final figures for fiscal 2011 estimate revenues and expenditures at $296 billion and $214 billion, respectively and thereby posting a budgetary surplus of $82 billion.

The exceptional achievements in fiscal year 2011 reflect notable developments in the petroleum sector in terms of both production and price. In fact, sustained crude output amounted to 10.05 million barrels per day, exactly 2 million barrels above the kingdom's Opec quota. To the delight of oil importing nations, Saudi authorities found an opportunity to raise output to help making for disruptions of Libyan oil supply during the year.

Saudi authorities do not reveal the average oil price used in calculating the revenues. The petroleum sector is uniquely significant in the Saudi economy by virtue of accounting for three quarters of both treasury income and exports. Also, the oil-fin-anced public sector contributes one third of the gross domestic product (GDP).

GDP growth

In 2011, value of the kingdom's GDP grew by 28 per cent in nominal prices to arrive at a record $577 billion, mainly due to developments in the oil sector.

On a negative note, the well-being of the Saudi economy depends on developments in the oil sector. Still, Saudi Arabia enjoys some influence on direction of oil prices, if only reflecting the fact of being the largest oil exporter in the world.

It is believed that the assumed price for fiscal years of 2011 and 2012 is around $60 per barrel or $55 per barrel by other accounts. This chiefly explains more than doubling of revenues in 2011 from $144 billion to $296 billion. In turn, stronger income allowed for increasing spending from $155 billion to $214 billion.

Happily, the budget for 2012 contains some exceptionally positive elements, namely setting aside nearly a quarter of planned spending on education and training and one-eighth on health services. Chances are this kind of spending would help to improve the kingdom's standing in the annual UN-released human development index (HDI).

Public sector spending

The 2011 version of HDI ranked Saudi Arabia number 56 globally, behind fellow Gulf Cooperation Council (GCC) states of the UAE, Qatar and Bahrain. The HDI boasts three variables, namely life expectancy at birth, education and income.

Happily, steady public sector spending is essential for achieving two main goals, specifically boosting economic activities and addressing unemployment. In reality, steady public sector spending encourages private sector investors to follow suit, in turn benefiting the cause of creating jobs for locals seeking proper employment opportunities.

Certainly, Saudi auth-orities need to address the unemployment challenge, ostensibly standing around 9 per cent. Still, demographic facts add to jobless pressures. Some 38 per cent of Saudis are below the age of 14 and thus many youths would enter the job market in the years to come, looking for suitable employment meeting their criteria in terms of working conditions and remunerations.

The magnitude of the Saudi economy in terms of budgetary expenditures and GDP size helps to explain the phenomenon of the kingdom being the sole Arab country in the G20.

 

The writer is a Member of Parliament in Bahrain.