Middle East will see ballooning deficits tumble as oil prices rise and economies diversify, IMF says

by Dramelin 9:00 AM 0 comments

Limited expectation that oil will go above $60 or $70 in next 2 years: IMF director    Friday, 28 Apr 2017 | 8:36 AM ET | 04:09 Last month, to soften the impact of austerity measures and curtail a public backlash, the Saudi government restored some perks and bonuses for government employees.
"When you have a massive or sizeable adjustment on the public finances sometimes you have to fine tune it.
And those adjustments or those reductions in the cuts are about 1 percent of the budget.
Therefore, I think they will be compensated by other measures," Azour added.
For the oil exporting nations of the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region, the cumulative overall budget deficits for the five-year period between 2016 and 2021 are estimated at $375 billion, down from a 2016 projection of $565 billion, the IMF said in its latest Regional Economic Outlook.
The average fiscal deficits soared to about 10 percent of GDP (gross domestic product) in 2015 and 2016, the IMF said, adding that the deficit could fall below 1 percent in 2022.
Saudi Arabia`s budget deficit shrank to 297 billion riyals ($79 billion) in 2016.
That was well below a record 367 billion gap in 2015, and below the government`s projection in its original 2016 budget plan of a deficit of 326 billion riyals, according to Reuters.
"What has been happening is two fronts, one is, to reduce the level of the budget deficit, and on the other hand, the diversification program through structural reforms in order to allow the economy to grow faster and the private sector to reach growth," Azour said.
"Bringing down the level of budget deficit will allow the Saudi government to have additional fiscal space that can be used for more investment and more specific social programs.