Saudi Arabia expects $17.3 billion deficit in fiscal 2009

Saudi Arabia announced on Monday it will cut spending next year by 6.9 percent as the plunge in oil prices hits revenues for the world's largest crude exporter.

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The government has set spending of 475 billion riyals (127 billion dollars) compared with 510 billion riyals (136 billion dollars ) in 2008, and projected a deficit of 65 billion riyals (17.3 billion dollars) next year, according to a cabinet spokesman.

The deficit comes after a record surplus of nearly 600 billion riyals (160 billion dollars), with government income soaring to 1.1 trillion riyals (293 billion dollars) in 2008 after oil prices surged to as high as 147 dollars a barrel during the year.

With government spending the main driver in the Saudi economy, the planned deficit suggests Riyadh is struggling to forestall a sharp slowdown next year as the global economic crisis affects the kingdom.

Last week Riyadh investment bank Jadwa Investment forecast that Saudi economic growth will fall to 1.5 percent in 2009 from an estimated 5.7 percent this year, due to fallout from the US financial crisis and the global economic meltdown.

The downturn has also ightened the availability of finance for a number of major private-sector projects in Saudi Arabia, the most powerful member of the oil exporters' cartel OPEC.

However, Jadwa said the government's net foreign assets, put at 433 billion dollars at the end of September, "gives Saudi Arabia an advantage over most other countries in alleviating the impact of the extreme financing pressures." More