Saudi Arabia’s Budget Deficit Surged Before the Oil Price Crash

Energy News Beat

ENB Pub Note: The story below is from Tsvetana Paraskova on Oilprice.com, and she has some great points about the Saudi Budgets. I have been saying that the Saudis need the $80 to $85 oil, but the IMF states that the oil break-even for their social programs is $90.

Saudi Arabia’s budget deficit for 2025 was initially projected at 101 billion riyals ($26.88 billion), or 2.3% of GDP, based on the state budget approved in November 2024, which assumed an oil price of around $75 per barrel and production of 9.5 million barrels per day (bpd). However, with Brent crude prices dropping to around $60–$63 per barrel in early 2025—a 20% decline from earlier levels—and OPEC+ delaying production increases until April, the deficit is expected to widen significantly.

Estimates for the 2025 deficit under these lower oil prices vary:

Goldman Sachs projects a deficit of $67–$75 billion (approximately 251–281 billion riyals, or 6–7% of GDP) if Brent averages $62 per barrel, driven by an 18% year-on-year drop in oil revenues to 150 billion riyals in Q1 2025.
Arab Gulf States Institute estimates a deficit of $56 billion (210 billion riyals, 5.2% of GDP) at $65 per barrel, or $62 billion (232 billion riyals, 6% of GDP) at $60 per barrel, assuming production at 9.2 million bpd and planned spending cuts.
First-quarter 2025 data already shows a deficit of 58.7 billion riyals ($15.6 billion), over half the full-year projection, with oil revenues down 18% to 150 billion riyals and spending up 5% to 322 billion riyals.

The International Monetary Fund (IMF) notes Saudi Arabia’s fiscal breakeven oil price is over $90 per barrel, with some estimates as high as $100 when including Public Investment Fund (PIF) spending on Vision 2030 projects. Current prices, averaging $75 in Q1 and now near $60, exacerbate the shortfall.

To manage the deficit, Saudi Arabia is increasing debt (public debt was 1.16 trillion riyals by September 2024, with a debt-to-GDP ratio of 29%) and may cut capital expenditures or delay Vision 2030 projects like Neom. Non-oil revenues, up 2% to 114 billion riyals in Q1, provide some resilience, but oil still accounts for 61% of revenue.

In summary, with oil prices at $60–$63 per barrel, Saudi Arabia’s 2025 budget deficit is likely to range between $56–$75 billion (5.2–7% of GDP), significantly higher than the original $26.88 billion forecast, unless spending is sharply reduced.

Source: Oilprice.com

Saudi Arabia’s budget deficit hit $15.6 billion in the first quarter of 2025, more than half its forecast for the entire year, even before oil prices significantly dropped.
The Q1 deficit stemmed largely from an 18% fall in oil revenues compared to the previous year, with the shortfall entirely covered by borrowing.
Analysts predict that if oil prices average around $62 per barrel, Saudi Arabia’s full-year 2025 deficit could surge to $67 billion, potentially forcing increased debt and delays in major investment projects.The recent oil price crash will surely hit Saudi Arabia’s state finances going forward, but the Kingdom already booked a hefty budget deficit for the first quarter, before oil prices dropped dramatically.
During the first quarter of the year, the budget deficit of the world’s top crude oil exporter swelled to $15.6 billion (58.7 billion Saudi riyals), data from the Saudi Finance Ministry showed.

That’s already more than half of the deficit the Kingdom had forecast for the full year in its FY 2025 budget statement— a deficit of $27 billion (101 billion riyals), which represents about 2.3% of Gross Domestic Product (GDP).

In the first quarter, Saudi oil revenues slumped by 18% from a year earlier to $40 billion (150 billion riyals). Non-oil revenues inched up by only 2%, leaving a bigger-than-planned gap in total revenues.

All the deficit in the first quarter was covered by borrowing, the finance ministry data showed, suggesting that Saudi Arabia prefers to continue tapping debt markets to using central bank foreign currency reserves.

The budget deficit soared in the first quarter, putting pressure on Saudi Arabia’s planned expenditures and investments this year, even before the price crash, which saw oil prices slump by more than $10 per barrel. The oil price slide – due to tariff-related concerns about oil demand and the Saudi-led hike of OPEC+ oil production – will additionally burden the finances of the OPEC+ leader.

Yet, Saudi Arabia appears to be willing to sustain a period of low oil prices to punish OPEC+ overproducers and discipline U.S. shale producers.

With oil at $60 per barrel, Saudi Arabia may have to accelerate borrowings and defer planned investments in its mega initiatives such as the futuristic city of Neom, analysts say.

As early as last month, Goldman Sachs economist Farouk Soussa told Bloomberg that if Brent averages about $62 per barrel this year (which is now the base-case of most investment banks), Saudi Arabia’s deficit could soar to $67 billion for the full-year 2025, more than double the Kingdom’s budget plan of a deficit of $27 billion.

By Tsvetana Paraskova for Oilprice.com