RIYADH — According to the second quarter budget statement for Saudi Arabia, the vast majority of the rise in the government revenue, up to 6 percent year-on-year, was due to improvements in oil revenue as result of higher yearly oil prices, but not higher export volumes.

The report, released by Jadwa Investment, said “due to lower output in accordance with the OPEC agreement, provisional Q2 2017 data shows that Saudi oil and refined products exports dropped by around 6 percent year-on-year.”

Non-oil revenue in Q2 2017 decreased by 17 percent year-on-year, with all but one segment -‘Taxes on income etc.’- showing yearly decreases, the report noted. While there were no specific tax increases to justify the sizable yearly increase in ‘Taxes on income etc.’, it’s believed a part of this rise could be due to a result of a general improvement in the collection process on behalf of government.

The report also highlighted that the total government expenses dropped by 1 percent year-on-year in Q2 2017. This was largely a result of a drop in capital expenditure, which fell by 12 percent year-on-year, whereas current expenditure rose by 1 percent year-on-year.

The Q2 2017 quarterly budget is an improvement over last year, but as with Q1 2017, this improvement is primarily a result of rises in government oil revenue.

Looking ahead, Jadwa Investment’s report said the strict compliance by Saudi Arabia to OPEC cuts, with lower oil exports, is likely to result in less dramatic yearly upswings, especially since oil revenue improved in H2 2016.

On the expenditure side, Jadwa Investment also expects to see a significant ramp up in government capital spending in H2 2017, similar to the pattern observed in H2 2016.

There are also expectations of year-on-year improvements in non-oil revenue following the introduction of an excise tax on harmful products, higher expat levies and dependent fees, and a rise in seasonal investment income. — SG