FILE PHOTO: General view in Riyadh, Saudi Arabia, June 21 2020. REUTERS/Ahmed Yosri

DUBAI (Reuters) – Saudi Arabia expects to post a deficit of 2.7% of gross domestic product this year and to reduce it further next year, it said in a preliminary budget statement for 2022, maintaining a focus on fiscal adjustment despite projected higher crude revenues.

Saudi Arabia had budgeted a 4.9% deficit for 2021 but that figure has now been revised to a 2.7% forecast, which the kingdom plans to reduce further to 1.6% of GDP in 2022.

According to its projections, Saudi Arabia would switch to a 0.8% surplus in 2023.

“The key message to us is a continued focus on expenditure restraint to stabilise the fiscal position”, said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

The improvement in the kingdom’s fiscal position this year was driven by a jump in revenues, from a budgeted 849 billion riyals to a revised estimate of 930 billion riyals, as oil production increased and crude prices rebounded.

The largest Arab economy suffered a deep recession last year as the coronavirus crisis hurt its nascent non-oil economic sectors while record-low oil prices weighed on state coffers, widening the 2020 budget deficit to 11.2% of GDP.

Riyadh forecasts economic growth of 2.6% this year and 7.5% in 2022, it said in the budget statement.

($1 = 0.2666 riyals)

Reporting by Davide Barbuscia; Editing by Edmund Blair and Bernadette Baum

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