Goldman Sachs warns Saudi Arabia's fiscal deficit could soar to more than $70 billion
author: Ann
2025-04-23
On April 2, US President Trump announced the implementation of a "reciprocal tariff" policy of $2.5 trillion, which triggered a violent shock in the global energy market. Brent crude oil prices plummeted by 9.7% in a single day. On the same day, the OPEC+ alliance unexpectedly expanded its production increase. The superposition of multiple factors caused the cumulative decline in oil prices to reach 14% as of April 10, and the market value evaporated by more than $300 billion.
Goldman Sachs economists pointed out that the reconstruction of global trade barriers, the rise in US shale oil production and the acceleration of new energy substitution, the resonance of the triple crisis has made the traditional oil price adjustment mechanism ineffective. The International Energy Agency has lowered its forecast for global crude oil demand growth in 2025. Farouk Sousa, chief economist for the Middle East at Goldman Sachs, warned that the continued low oil prices may more than double Saudi Arabia's budget deficit.
Saudi Arabia is promoting the "Vision 2030" economic transformation plan, of which the Neom project is expected to cost $1.5 trillion. Coupled with the investment in major projects such as the 2034 World Cup and the 2030 World Expo, the fiscal expenditure pressure is huge. The International Monetary Fund predicts that Saudi Arabia needs oil prices above $90 a barrel to balance its budget, while Goldman Sachs has lowered its Brent crude oil price forecast to $62 a barrel by the end of 2025, which may lead to a significant increase in Saudi Arabia's $30.8 billion budget deficit in 2024.
Sousa predicts that if oil prices remain around $62, Saudi Arabia's deficit may increase from $30-35 billion to $70-75 billion, which will lead to more borrowing, spending cuts or asset sales. Although Saudi Arabia has a low debt-to-GDP ratio, a high credit rating and $410.2 billion in foreign exchange reserves, large-scale debt issuance still faces challenges. Regional economists predict that some Neom projects may be cancelled. However, Sousa also said that Saudi Arabia has a number of response options. Although it faces challenges, it does not constitute a crisis. The key lies in how it will choose its response strategy.
Goldman Sachs economists pointed out that the reconstruction of global trade barriers, the rise in US shale oil production and the acceleration of new energy substitution, the resonance of the triple crisis has made the traditional oil price adjustment mechanism ineffective. The International Energy Agency has lowered its forecast for global crude oil demand growth in 2025. Farouk Sousa, chief economist for the Middle East at Goldman Sachs, warned that the continued low oil prices may more than double Saudi Arabia's budget deficit.
Saudi Arabia is promoting the "Vision 2030" economic transformation plan, of which the Neom project is expected to cost $1.5 trillion. Coupled with the investment in major projects such as the 2034 World Cup and the 2030 World Expo, the fiscal expenditure pressure is huge. The International Monetary Fund predicts that Saudi Arabia needs oil prices above $90 a barrel to balance its budget, while Goldman Sachs has lowered its Brent crude oil price forecast to $62 a barrel by the end of 2025, which may lead to a significant increase in Saudi Arabia's $30.8 billion budget deficit in 2024.
Sousa predicts that if oil prices remain around $62, Saudi Arabia's deficit may increase from $30-35 billion to $70-75 billion, which will lead to more borrowing, spending cuts or asset sales. Although Saudi Arabia has a low debt-to-GDP ratio, a high credit rating and $410.2 billion in foreign exchange reserves, large-scale debt issuance still faces challenges. Regional economists predict that some Neom projects may be cancelled. However, Sousa also said that Saudi Arabia has a number of response options. Although it faces challenges, it does not constitute a crisis. The key lies in how it will choose its response strategy.
Shandong local refineries struggle to survive under the double squeeze of policies and market
Competition pattern and enterprise layout of China's auto parts industry
