Saudi Oil Windfall Unlikely to Offset Fiscal Strains

Dow Jones08-06

1424 GMT - Saudi Arabia's resilience to the closure of the Strait of Hormuz masks a worsening underlying fiscal position, says William Jackson, chief emerging markets economist at Capital Economics, in a note. Access to the Red Sea helped keep oil exports flowing, while higher oil prices offset lower production and lifted second-quarter oil revenue 22% from a year earlier, according to Capital Economics. However, Jackson says the recent windfall only masks a budget deficit running at around 7% of GDP on a four-quarter basis, compared with 2.5% at the end of 2024. He expects oil prices to fall back, pushing public debt above 50% of GDP within the next few years and leaving the government with limited room to provide fiscal stimulus if another shock hits.

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