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| - Saudi Arabia projected its 2020 budget deficit will soar to around $79 billion, the finance ministry said Tuesday, as the world's top crude exporter reels from a coronavirus-led economic downturn. "It is expected that the budget deficit will increase at the end of 2020 to about 298 billion riyals, and we aim to reduce it by the end of 2021 to 141 billion riyals ($37.6 billion)," the finance ministry said in its annual budget. Late last year, the kingdom projected an annual budget deficit of $50 billion for 2020, up $15 billion on 2019. Riyadh has posted a budget deficit every year since the last oil price rout in 2014, prompting the petro-state to borrow heavily and draw from its reserves to plug the shortfall. The kingdom projects its economy -- the largest in the Arab world -- will grow by 3.2 percent next year, largely recovering from a projected 3.7 percent contraction this year, the budget statement said. The International Monetary Fund expects the kingdom's economy to shrink by 5.4 percent this year. "The (economic) crisis has been managed with great care and effectiveness, which led to the mitigation of the negative effects on the Saudi economy," Saudi Crown Prince Mohammed bin Salman was quoted as saying by state media. "2020 was a difficult year for the whole world due to the outbreak of the coronavirus pandemic, but the kingdom's economy has proven its ability to withstand its impact." The kingdom is tightening its belt and pressing ahead with austerity measures amid low oil prices. Saudi Arabia plans to spend 990 billion riyals ($263.91 billion) in 2021, according to the budget statement, a drop of about seven percent compared to this year. Oil income contributes to more than two-thirds of Saudi public revenues. In November, energy giant Aramco -- Saudi Arabia's cash cow -- posted a 44.6 percent slump in profits for the third quarter, as the coronavirus pandemic weighs heavily on the global demand for crude oil. Saudi Arabia needs a crude price of about $80 a barrel to balance its budget, economic experts say, higher than the current price of around $50. A drop in state revenues is expected to hinder Crown Prince Mohammed bin Salman's ambitious "Vision 2030" reform programme to overhaul the kingdom's energy-reliant economy. The austerity measures so far announced are expected to only partially rein in the yawning budget deficit. In July, Saudi Arabia tripled its value added tax (VAT) to 15 percent, an unpopular measure that has weighed on household income, pushed up inflation and hit consumer spending. But the government has been careful not to cut public jobs and salaries amid already high youth unemployment. Nearly two-thirds of all Saudis are employed by the government, and the public sector wage bill accounts for roughly half of all government expenditure. In recent years, the petro-state has pushed other aggressive campaigns to diversify its income, hiking fees on expatriate workers and raising fuel and electricity prices. mah-ac/dwo
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