Effects of Decreasing in Oil Prices on Global and Saudia Arab Economy

8/20/2019 Effects of Decreasing in Oil Prices on Global and Saudia Arab Economy

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EFFECTS OF DECREASING IN OIL PRICES ON GLOBAL AND SAUDIA

ARAB ECONOMY:

During the past decade, the price of oil has traveled from $60 per barrel to a peak of $146 in

2009 and subsequentl descended again to belo! $"0 in 201"# hile oil is sold in a global

market, the effect of rising or falling prices can be ver different for importing and e%porting

countries# &lobal 'et!ork (erspectives asked e%perts across the &lobal 'et!ork for

)dvanced *anagement ho! the changing price of oil impacts their economies#

Brazil

+he oil price matters in ra-il for various reasons# .irst of all, (etrobras based its pre/salt

investment proects on the proections of higher oil prices# alculations state the cost of

producing pre/salt oil bet!een 3$41 and 3$" per barrel# 5ast .rida, the price of rent

approached the grim 3$41 floor#

(etrobras, being the largest indebted oil compan in the !orld, alread had to revise

significantl its investment plans, not onl due to the declining oil price, but also due to the

ongoing corruption scandal estimated 3$2 billion7, !hich triggered (etrobras8 rating

do!ngrade#

+his significant slo!do!n in its investment strateg plans !ere basicall sliced b half7 !ill not

onl harm future output of ra-il8s oil production and consequentl reduce !orld production

significantl 10 to 1" ears on!ards, but it !ill also decelerate sharpl gro!th in industries and

the construction sector, linked to the ra-ilian oil production# ith the current recession

e%pected minus 2 to 2#" for 201"7 this loss of potential emploments comes reall at a

bad time# esides, let8s not forget (etrobras8 foregone receipts earmarked for ra-ilian

education sstem that needs urgentl substantial and effective investment in order to raise

significantl ra-il8s lo! productivit level#

:n the other hand, since 2006 the ra-ilian government has subsidi-ed petrol prices to curtailinflation# ;n 2011/1< the subsid cost amounted to an estimated 4= billion >eals# 3o, falling oil

prices help the troubled compan to recover its losses accumulated over the past and allo!

the government to cut subsidies at times !here it has to generate a primar fiscal surplus#

?o!ever, the depreciating >eal might become the counterproductive factor in this equation, as

import prices are rising in terms of domestic currenc#


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China

3ince hina replaced the nited 3tates as the !orld@s largest net oil importer t!o ears ago,

the recent falling oil price ma affect the hina econom in various different !as, in particular!hen hina is undergoing a period of rapid economic slo!do!n no!# .irst, as the !orld8s

second largest econom, the strong hinese economic gro!th has been a maor driving force

for the global econom for man ears# hile the maor indicators of the second quarter in

201" sho! that hina8s economic gro!th has stabili-ed, a !ide agreement is that hina is

going through a slo!ing of gro!th and is flirting !ith recession# +he falling oil price ma help

stimulate gro!th in hina and bolster economic gro!th especiall in the industrial investment

field# 3econd, if the declining trend in oil prices continues, since more than half of domestic oil

suppl depends on imports, the falling oil prices !ill translate into huge foreign e%change

savings for hina# *oreover, at the industrial level, lo! oil prices ma not onl bring do!n

business e%penditures for do!nstream industries, such as logistic companies and airline

industries, but also affect prices on agricultural products as !ell# +his !ill in turn benefit the

consumer sectors as lo!er inflation raises consumption through higher disposable incomes#

Germany

+he &erman econom heavil depends on car manufacturing, so the oil price ma be

considered a crucial determinant in &erman8s !ealth#

) lo!er oil price accelerates car purchases of the emerging global middle class# +he (

Anerg :utlook 20


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cheap solar and !ind energ# *ost &erman car makers have reali-ed this fundamental

technological shift and taken action to enter this nascent market#

Mexico

+he collapse of oil prices to levels belo! $"0 per barrel7 since late last ear has logicall

benefited countries that consume oil, oil products, gasoline, and other derivatives, and has hurt

oil/producing countries b reducing their income from sales# ;n the case of *e%ico, this

situation is e%acerbated b the continuing decline in oil production b (eme%, the state/o!ned

oil compan that has held a more/than/seven/decade monopol in 2014 (eme% reached its

lo!est e%traction volume since 19=67#

+he negative impact from the collapse in oil prices !ill be greater in *e%ico than in other

e%porting countries because lo!er oil revenues decisivel affect *e%ican public finances more

than eform

approved b the *e%ican government last ear, !hich opens the state monopol to private

investment and competition, making *e%ico attractive to investors in energ sector industries

and sub/industries# )lthough *e%ico is arriving 20 ears late to this gro!ing and increasingl

competitive market, the benefits of this paradigm shift !ill be evident# +he Anerg >eform

means foreign direct investment, technolog, and advanced practices not previousl available

to *e%ico, along !ith final pricing that reflects the true cost of production# ;t !ill also allo! for

the moderni-ation of (eme% and the entire oil and oil derivatives production chain#

?o!ever, it is necessar to ensure proper implementation of the Anerg >eform to achieve the

e%pected results, especiall in the case of oil, !here the drop in prices is acting as adisincentive in the process# :ne e%ample is the recent auction of oil plas in risk/sharing

production proects, from !hich 2= bids ielded ust a single compan being a!arded t!o oil

fields# Despite these disappointing results, both the *e%ican government and the business

communit have high e%pectations that improved incentives aligned !ith international best

practices !ill enhance the attractiveness of the ne%t rounds#


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>ules and regulations can al!as be improved upon and adapted to the realit of the

marketplace# 3o far, the efforts made b the *e%ican government to successfull implement

the reform seem to be going in the right direction, and the stakeholders involved in the process

e%pect that these efforts !ill contribute to triggering the energ potential of *e%ico and its

competitiveness in the international arena#

Nigeria

+he changing price of oil has caused 'igeria8s current account balance to fall b 69#


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strong demand from motorists#### >est assured, though, that eventuall prices at the pump !ill

fall into line !ith crude prices again#

Saudi Arabia's refusal ! redu"e !il !u#u s$!%s &! si& !f abai&( bu is

deer)i&ai!& ! dri*e !u US s$ale #r!du"ers is a+i& a !ll !& $e +i&d!)'s

e"!&!),( re"e& daa suess- A&d %i$ $e e.#e"ai!& !f Ira&'s reur& !

l!bal !il )ar+es alread, u&der)i&i& fraile #ri"es( Ri,ad$'s srae, l!!+s

i&"reasi&l, li+e i )i$ be a a)ble %i$ de"li&i& !dds-

Al$!u$ $e +i&d!) $as subsa&ial reser*es( i a##ears ! be bur&i&$r!u$ is fi&a&"ial %ar "$es a a& alar)i& rae- A""!rdi& ! $e Saudi

Arabia& M!&ear, Ae&",( f!rei& e."$a&e reser*es fell ! /012b& a $e

e&d !f O"!ber fr!) /314b& a ,ear earlier-

Oil prices and OPEC

If OPEC d!es &! "!)#e&sae f!r $e i&"rease i& Ira&'s !il e.#!rs b, "ui&

!il #r!du"i!&( $e I&er&ai!&al M!&ear, Fu&d sa,s !il #ri"es "!uld fall

be%ee& fi*e a&d 56 #er"e& i& $e )ediu) er)- E&er, ia& BP esi)aes

$a Ira& $as $e f!ur$7lares #r!*e& !il reser*es i& $e %!rld afer

8e&e9uela( Saudi Arabia a&d Ca&ada( as %ell as $e se"!&d7lares as

reser*es( a""!rdi& ! $e IMF-

!% ;ui"+l, Ira& "a& ra)# u# #r!du"i!& is u# f!r debae( bu a "!&se&sus

a##ears ! be e)eri&-


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i&"rease #ressure !& Saudi's e"!&!),( i& %$i"$ ab!u 6 #er"e& !f

!*er&)e& re*e&ues are deri*ed fr!) $,dr!"arb!&s-

=$alid al7Da+$il( a& assisa& #r!fess!r !f #!lii"al s!"i!l!, a =i& Saud

U&i*ersi,( !ld Al


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B, $e e&d !f $is ,ear( Saudi Arabia's bude defi"i %ill rea"$ 46 #er"e& !f

GDP( a""!rdi& ! a De"e)ber re#!r fr!) Ca#ial E"!&!)i"s- T$e siuai!&

$as #r!)#ed $e IMF ! %ar& $a Saudi "!uld e.$aus is reser*es %i$i&

fi*e ,ears if #!li"ies re)ai& u&"$a&ed- Ri,ad$ $as res#!&ded %i$ "uba"+si& s#e&di&( a&d is u&der i&e&se #ressure ! redu"e e.#e&si*e e&er,

subsidies-

T$e IMF esi)aes $a $ese i)#li"i subsidies "!s $e !*er&)e& /2b& i&

4651( !&e !f $e $i$es !als i& $e Gulf C!!#erai!& C!u&"il "!u&ries(

se"!&d !&l, ! Ba$rai&- Ae&i!& is &!% ur&i& ! Saudi's 4650 bude- I is

e.#e"ed ! be !&e !f )!sl, $ea*il, s"rui&ised budes i& ,ears( as i&*es!rs

see+ reassura&"e $a $e +i&d!)'s fi&a&"es are u&der "!&r!l-

A""!rdi& ! #ress re#!rs( lea+ed )e)!s fr!) =i& Sal)a& ! $e Mi&isr,

!f Fi&a&"e i& O"!ber !rdered !*er&)e& e&iies ! s!# &e% i&frasru"ure

#r!?e"s a&d ! #!s#!&e #ur"$ases !f &e% "ars a&d fur&iure- M!u&i&

e"!&!)i" u&"erai&, led Sa&dard P!!r's ! d!%&rade Saudi's rai& fr!)

AA7A75H ! A A75 i& O"!ber( %i$ a %ar&i& !f a #!ssible fur$er

d!%&rades-

T$e d!%&rade #us$es u# $e "!ss !f b!rr!%i& a a i)e %$e& !*er&)e&

re*e&ues $a*e falle& s$ar#l,- T$ere $as als! bee& s#e"ulai!& i& fi&a&"ial

)ar+es ab!u $!% $is "!uld affe" $e Saudi ri,al( %i$ $e s#read be%ee&

f!r%ard a&d s#! raes re"e&l, %ide&i& ! $e $i$es le*el si&"e 466-

!%e*er( a""!rdi& ! Ca#ial E"!&!)i"s( $a s"e&ari! %!uld be $e las

res!r( a&d Saudi $as !$er !#i!&s $a "!uld i&"lude a##i& i&! $ei&er&ai!&al b!&d )ar+es earl, i& 4650 7 s!)e$i& i $as &e*er d!&e bef!re-

Au$!riies are "urre&l, issui& ar!u&d SAR 46b& />b&J !f deb #er )!&$

! l!"al ba&+s( redu"i& $e a)!u& l!"al ba&+s $a*e lef ! le&d ! $e #ri*ae

se"!r( a""!rdi& ! a& esi)ae fr!) Ca#ial E"!&!)i"s-

http://www.imf.org/external/pubs/ft/scr/2015/cr15286.pdfhttp://www.imf.org/external/pubs/ft/scr/2015/cr15286.pdfhttp://www.imf.org/external/pubs/ft/scr/2015/cr15286.pdfhttp://www.imf.org/external/pubs/ft/scr/2015/cr15286.pdf


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Saudi Arabia’s 2016 Fiscal Budget

T$e !*er&)e&Ks bude f!r $e 4650 fis"al ,ear 5 De"e)ber 465> ! 6

De"e)ber 4650J %as e&d!rsed b, $e C!u&"il !f Mi&isers !& 42$ De"e)ber-

I #!i&s ! a susai&ed "!))i)e& i& )ai&ai&i& a $i$ le*el !f s#e&di&

des#ie $e "!&i&ued e&*ir!&)e& !f l!%er !il #ri"es Fiure 5J- Des#ie

bei& redu"ed sli$l,( budeed s#e&di& is se ! #la, a *ial r!le i&

su##!ri& $e e"!&!), i& 4650- T$e $i$li$s i&"lude:

• T$e !*er&)e& $as reaffir)ed is "!))i)e& ! su##!r $e e"!&!),

b, budei& f!r a SR40 billi!& defi"i i& &!)i&al er)s( based !&

re*e&ues !f SR>51 billi!& a&d e.#e&diures !f SR216 billi!&- T$e defi"i%ill "!&i&ue ! be fi&a&"ed usi& a "!)bi&ai!& !f Saudi Arabia&

M!&ear, Ae&",Ks SAMAJ $ue s!"+ !f &e f!rei& asses( a&d d!)esi"

deb- SAMA &e f!rei& asses !aled /042 billi!& a $e e&d !f N!*e)ber(

%$ile #ubli" deb r!se fr!) a l!&7er) l!% !f SR11- billi!& i& 4651 !

rea"$ SR514 billi!& i& 465>( ,e sill l!% relai*e ! GDP a >-2 #er"e&-

• Des#ie $e l!bal e&*ir!&)e& !f l!%er !il #ri"es( $e =i&d!) $as

)ai&ai&ed a $i$ le*el !f s#e&di& i& $e 4650 fis"al bude- Edu"ai!&a&d $eal$"are re)ai& $e f!"us !f !*er&)e& s#e&di&( a""!u&i& f!r >

#er"e& !f !al s#e&di&- $ils s#e&di& !& )iliar, a&d se"uri, ser*i"es

"!&siues $e lares si&le s$are a 4> #er"e&- A &e% all!"ai!&

a""!u&i& f!r 44 #er"e& $as bee& i&r!du"ed ! su##!r $e bude a&d

$el# address s$!raes i& re*e&ue- e esi)ae $a budeed i&*es)e&

s#e&di& $as bee& redu"ed ! SR461 billi!& i& 4650( %i$ s#e&di& !& +e,

s!"ial i&frasru"ure #r!?e"s )ai&ai&ed- T$is #!i&s ! a radual"!&s!lidai!& i& $e fis"al sa&"e bu als! s$!%s $e !*er&)e&Ks susai&ed

"!))i)e& !& )ai&ai&i& a $i$ le*el !f s#e&di& !& $u)a& "a#ial a&d

s!"ial i&frasru"ure-


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• T$e budear, #erf!r)a&"e i& 465> "a)e "l!se ! !ur f!re"ass %i$ a

defi"i !f SR03 billi!&( !r 5> #er"e& !f GDP #er"e& "!)#ared !

$e #re*i!us ,ear( rea"$i& is l!%es le*el si&"e 466 a SR062 billi!&- e

esi)ae !il re*e&ue ! $a*e falle& b, >5 #er"e& des#ie re"!rd #r!du"i!&

56-4 )b#d ,ear7! 7N!*e)berJ- Fis"al e.#e&diure %as redu"ed f!r $e

firs i)e si&"e 4664 ! rea"$ SR3> billi!&( SR50 billi!& l!%er $a&

4651-

• I& li&e %i$ !ur e.#e"ai!&s( #reli)i&ar, e"!&!)i" daa s$!%s $a $e

e"!&!), "!&i&ued ! sl!% i& 465> %i$ real GDP r!%$ !f -1 #er"e&


10/48

se"!rs- L!%er !il e.#!r re*e&ues )ea& a firs "urre& a""!u& defi"i

si&"e 52( a 0- #er"e& !f GDP !r )i&us /15- billi!&-

• L!!+i& a$ead( a Nai!&al Tra&sf!r)ai!& Pr!ra) NTPJ %ill li+el, be

a&&!u&"ed b, $e !*er&)e& i& ( d!%& b, SR46 billi!& ! SR216 billi!&( u&ders"!ri& $e

!*er&)e&Ks deer)i&ai!& a&d abili, ! su##!r e"!&!)i" a"i*i, des#ie

$e #re*aili& subdued !il #ri"i& e&*ir!&)e&- I fur$er $i$li$s $e sr!&

f!"us !& e"!&!)i" di*ersifi"ai!& as s#e&di& !& #$,si"al a&d s!"ial

i&frasru"ure $as li+el, bee& +e# a ele*aed le*els- e als! belie*e $e 4650

bude &u)bers are )!re "!&ser*ai*e $a& #re*i!us ,ears( ?udi& b, $e

u&derl,i& assu)#i!&s !& !il #ri"es a&d $is!ri"al #aer&s !f !*er&)e&

!*ers#e&di&-


11/48

As $i$li$ed i& !ur 465> bude re#!r las ,ear( %e e.#e" $e !*er&)e&

! de)!&srae a& i&"reasi& e&de&", ! )!&i!r "a#ial s#e&di&- I&iiai*es

f!r i$er "!&r!l !*er "a#ial s#e&di& i&"lude $e !rder b, $e C!u&"il !f

Mi&isers( ba"+ i& A#ril( re;uiri& $e +i&Ks a##r!*al f!r a&, #r!?e" i&e."ess !f SR566 )illi!&- e als! a&i"i#ae $e NTP ! be a&&!u&"ed i&

0 billi!&J- T$e $ue s!"+ !f asses $a $e !*er&)e&

"a& "all !& i*es $e =i&d!) a& ad*a&ae !*er )!s !$er "!u&ries i&

alle*iai& $e i)#a" !f l!%er !il #ri"es- Als!( $e series !f s!*erei& b!&d

issua&"e ar!u&d SR46 billi!& #er )!&$ si&"e


12/48

$e bes fi&a&"i& !#i!&s a*ailable- T$is i&"ludes b!$ d!)esi" a&d f!rei&

b!rr!%i& i& !rder ! a*!id "r!%di& !u "redi ! $e #ri*ae se"!r-

E"penditure

T!al e.#e&diure is budeed a SR216 billi!& i& 4650 Fiure 4J- T$is is

l!%er $a& $e a)!u& budeed f!r 465> Fiure J- $ile $ere %as a s)all

de"li&e i& budeed s#e&di&( $is s#e&di& is *er, $i$ a&d refle"s $e

!*er&)e&Ks %illi&&ess ! su##!r $e e"!&!), des#ie $e fall i& re*e&ues-

e belie*e $a $is se&ds a& i)#!ra& )essae ! $e #ri*ae se"!r $a $e

fall i& !il #ri"es %ill &! #re*e& $e !*er&)e& fr!) fulfilli& is i&*es)e&

#la&s- i$ fis"al s#e&di& re)ai&s #s,"$!l!i"all, i)#!ra& f!r $e #ri*aese"!r( i& !ur *ie%-

$e& "!)#ared ! a"ual s#e&di&( $e budeed a)!u& s$!%s a de"li&i&

re&d fr!) a"ual le*els i& b!$ 4651 a&d 465>( %$i"$ !aled SR5(555 billi!&(

a&d SR3> billi!& res#e"i*el,- e *ie% $is as a deer)i&ed eff!r ! "urail

a"ual s#e&di&( i*e& $a $e !*er&)e& $as "!&sise&l, !*erru& is

budeed s#e&di& b, a& a*erae !f 41 #er"e& !*er $e #as de"ade Fiure

1J-T$e las i)e $a budeed s#e&di& e."eeded a"ual s#e&di& "!)#ared

! $e #re*i!us ,ear %as i& 4666- Budeed s#e&di& as a s$are !f &!&7!il

GDP is i& li&e %i$ $is!ri"al le*els( a a& a*erae !f >6 #er"e& i& $e las e&

,ears- Fur$er)!re( %e $i&+ $a $e !*er&)e& %ill are !al s#e&di& !

be fi.ed a a "erai& #r!#!ri!& !f &!&7!il GDP- T$is a##r!a"$ %ill li+el, be

$i$li$ed i& $e 4646 NTP( $ereb, i)#r!*i& $e "!&fide&"e relaed !

bude a&&!u&"e)e&s as %ell as redu"i& $e "$a&"e f!r u&&e"essar,

s#e&di&-

T$e 4650 bude a&&!u&"e)e& did &! s$!% a brea+d!%& b, ,#e !f

e.#e&diure- e esi)ae a rise i& budeed "urre& s#e&di& $e )!re riid

#ar !f e.#e&diureJ( %$ile %e e.#e" a redu"i!& i& budeed i&*es)e&

s#e&di&- Budeed "urre& s#e&di& $as li+el, bee& raised ! SR052 billi!&


13/48

!r b, >-0 #er"e& "!)#ared ! $e le*el budeed f!r las ,ear( $is is $alf $e

56 #er"e& a*erae a&&ual r!%$ i& budeed "urre& s#e&di& !*er $e las

e& ,ears( a&d "!&sise& %i$ sl!%i& r!%$ i& "urre& s#e&di& !*er $e las

%! ,ears- e $i&+ $a bude "!))i)e&s( s#e&di& #a"+aes( a&d *er,$i$ #ubli" se"!r e)#l!,)e& $ad a""eleraed "urre& s#e&di& duri& $e

#re*i!us ,ears- aes a&d salaries are $e lares "!)#!&e& !f $is a&d are

"erai& ! "!&i&ue bei& a )a?!r "!&ribu!r ! r!%$- !%e*er( $e bude

sae)e& i&"luded a lis !f )easures ! be i)#le)e&ed %$i"$ %ill redu"e $e

r!%$ i& $is ,#e !f s#e&di&( s#e"iall, si&"e s#e&di& !& %aes a&d

salaries a""!u&ed f!r >6 #er"e& !f a"ual s#e&di& i& 465>- O#erai!&s a&d

)ai&e&a&"e "!ss are als! li+el, ! be a r!%i& s!ur"e !f "urre& s#e&di&

i& fuure ,ears as )a?!r #r!?e"s be"!)e !#erai!&al-

A $e sa)e i)e( %e belie*e $a $e !*er&)e& $as budeed a "u !

i&*es)e& s#e&di& b, 5- #er"e& ! SR444 billi!& i& 4650- Budeed

"a#ial s#e&di& $as alread, bee& "u b, -1 #er"e& f!r 465>( a&d %e e.#e"

$e !*er&)e& ! $a*e budeed f!r a& e*e& larer "u i& $is ,#e !f

s#e&di& i& 4650- T$a said( %e e.#e" $e 4650 budeed i&*es)e&

s#e&di& is 45- #er"e& $i$er $a& is le*el fi*e ,ears a!-

$ile budeed e.#e&diure i& 4650 s#a&s all se"!rs( $e #ri!riies are

"!&sise& %i$ re"e& ,ears Fiure >J- Miliar, a&d se"uri, ser*i"es $as bee&

all!"aed 4> #er"e& !f $e bude( $e lares a)!& all all!"ai!&s-

Edu"ai!& is all!"aed $e se"!&d bies s$are( a 4 #er"e& !f !al

s#e&di&( f!ll!%ed b, $e $eal$ a&d s!"ial affairs %i$ 5 #er"e&-

S#e&di& #la&s f!r +e, #ubli" se"!r areas !uli&ed i& $e bude i&"lude:

2016 Budget Allocation

#S$ billion%


14/48

Bo" 1& Budget Allocation 2016

T$e 4650 bude )ade a brea+ %i$ $e re#!ri& f!r)a !f las fe% ,ears a&d

i&r!du"ed f!ur &e% li&e ie)s- T$e )!s si&ifi"a& %as Miliar, a&dSe"uri, Ser*i"es ie)( %$i"$ $ad &! #re*i!usl, bee& dis"l!sed( a&d

re#rese&ed a !al bude all!"ai!& !f 4> #er"e& a SR45 billi!&- Edu"ai!&

a&d Trai&i&( $e se"!&d lares bude ie)( %as all!"aed SR54 billi!& i&

4650( re#rese&i& a de"li&e !f 54 #er"e& ,ear7!&7,ear fr!) SR453 billi!& i&

465>- eal$ a&d S!"ial De*el!#)e& dr!##ed b, a si9able 1 #er"e& ,ear7

!&7,ear ! SR56> billi!&- $ils Edu"ai!& a&d Trai&i& a&d eal$ a&d

S!"ial De*el!#)e& budes are d!%& ,ear7!&7,ear( as $e bude re#!r$i$li$s( $ere are a &u)ber !f #r!?e"s %$i"$ are bei& fu&ded fr!)

#re*i!us budeKs sur#luses( i&di"ai& $a b!$ $ese se"!rs %ill "!&i&ue !

be&efi fr!) i&*es)e&- Mu&i"i#ali, Ser*i"es( %$i"$ )ade u# #er"e& !f

$e !al all!"ai!&( de"li&ed b, 10 #er"e& !r SR5 billi!&- E"!&!)i"

Res!ur"es is a &e% li&e a&d %ill be dis"l!sed i& $e bude sae)e&(

re#rese&i& #er"e& !r SR32 billi!& !f budeed e.#e&diure i& 4650-

N!abl, i i&"ludes a& all!"ai!& f!r $e =i& Abdulla$ Ci, f!r A!)i" a&d

Re&e%able E&er, =A7CAREJ reaffir)i& $a $e !*er&)e& is +ee& !&

de*el!#i& a #la& !& re&e%able e&er,( %$i"$ fis i& %i$ $e #r!#!sal !

"!&ser*e &aural res!ur"es !uli&ed i& $e bude re#!r- Publi"

Ad)i&israi!& is a&!$er &e% ie) re#rese&i& SR41 billi!&- A Bude

Su##!r Pr!*isi!& li&e ie) $as als! bee& added re#rese&i& a ba"+7u# fu&d


15/48

i& "ase !f s$!raes i& re*e&ue due ! *!laili, !f !il #ri"es ! $e u&e !f

SR52 billi!& !r 44 #er"e& !f $e !al bude- T$is is %el"!)e addii!& !

$e all!"ai!& a&d re#rese&s a "lear si& $a $e !*er&)e& is #ursui& a

)!re seri!us ris+ )a&ae)e& a##r!a"$ ! !*er&)e& fi&a&"es- T$a bei&said( i is "!&"ei*able $a $is #r!*isi!& re)ai&s u&!u"$ed duri& 4650 due

! beer7$a&7e.#e"ed !*er&)e& re*e&ue-

Economic' Fiscal and Structural $e(orm

T$is ,earKs Saudi bude s#elled !u "lear !b?e"i*es ! "!&s!lidae

e.#e&diure !*er $e &e. $ree ! fi*e ,ears- e a&i"i#ae )!re deail %ill be

dis"l!sed i& $e NTP( bu $ree +e, #!i&s sa&d !u fr!) $e bude re#!r%$i"$ $e !*er&)e& $as !uli&ed i %ill a"+le- Firsl,( beer )a&ae)e&

!f e.#e&diure( se"!&dl,( i)#r!*i& re*e&ue s!ur"es a&d deb "a#a"i,(

$irdl,( li)ii& r!%$ i& bl!aed e.#e&diure %$ils "$a&&eli& res!ur"es !

+e, se"!rs ! e&sure e"!&!)i" r!%$-

Better management o( e"penditure&

T$e i)#le)e&ai!& !f a #ubli" fi&a&"e u&i i& $e Mi&isr, !f Fi&a&"e a&d $esei& u# !f $e Nai!&al Pr!?e" Ma&ae)e& Ae&", are %! i&iiai*es

%$i"$ are desi&ed ! e&sure $a e.#e&diure is +e# i& "$e"+- T%! fur$er

ref!r)s( $e i)#r!*e)e& !f budear, #!li"ies a&d #r!"edures a&d re*ie%i&

e.isi& !*er&)e& #r!?e"s( %ill ai) ! reassess e.isi& #ra"i"es a&d

#r!?e"s ! e&sure $e, bri& reaer *alue ! !*er&)e&Ks de*el!#)e&

!b?e"i*es-

)mpro*ing re*enue sources and debt capacity&

T$e i)#le)e&ai!& !f a GCC %ide *alue added a. is a )a?!r de*el!#)e&

$a %ill add ! !*er&)e& re*e&ues- I %ill als! be su##le)e&ed b,

addii!&al fees !& !!ds dee)ed as u&desirable( su"$ as !ba""! a&d s!f


16/48

dri&+s- T$e bude re#!r als! "ies #ri*ai9i& a ra&e !f se"!rs a&d

e"!&!)i" a"i*iies( %$ils a& i)#r!*e)e& i& $e )a&ae)e& !f $e saeKs

asses %ill als! e&erae )!re re*e&ue-

Si&"e )id7465> $e !*er&)e& $as bee& issui& b!&ds )ai&l, ! $e

d!)esi" ba&+i& se"!r- T$is is e.#e"ed ! "!&i&ue duri& 4650( bu %i$

$e $el# !f a deb )a&ae)e& u&i %i$i& $e Mi&isr, !f Fi&a&"e( $e

!*er&)e& %ill be able ! i)#r!*e is fi&a&"i& srae, s! all!% "!&i&ued

b!rr!%i& fr!) b!$ d!)esi" a&d i&er&ai!&al s!ur"es-

+imiting e"penditure and c!anneling resources&

T%! )a?!rs s!ur"es !f e.#e&diure are ear)ar+ed f!r li)ied r!%$- O&e !f

$ese relaes ! !*er&)e& su##!r ! e&er, a&d uiliies- A r!,al de"ree

a&&!u&"ed $a #er!l #ri"es %!uld ! u# b, >6 #er"e&( u# fr!) 50 "e&s 6-0

ri,alsJ ! 6-41 "e&s 6-6 ri,alsJ f!r a lier !f $i$ rade as!li&e- !%e*er(

$e bude re#!r saes $a )!re #ri"e rises s$!uld be e.#e"ed as e&er,(

%aer( a&d ele"ri"i, #ri"es %ill be i&"reased raduall, !*er $e &e. fi*e

,ears- T$is is a %el"!)e )!*e si&"e( a""!rdi& ! %i$ al)!s /->

billi!& !f $a !& as!li&e al!&e B!. 4J-

T$e !$er area %ill be relaed ! re"urri& e.#e&diures( es#e"iall, %aes(

salaries( all!%a&"es %$i"$ a)!u&ed ! SR1>6 billi!& i& 465>- T$is %!uld

i)#l, $a $e #ubli" se"!r is li+el, ! see sl!%er r!%$ i& salaries !r sl!%er

r!%$ i& $ead"!u&( !r #er$a#s b!$- I& li$ !f $is( ! e&sure $a $e

#ri*ae se"!r "a& "reae a larer s$are !f ?!bs( $e !*er&)e& #la&s !i)#r!*e $e i&*es)e& e&*ir!&)e& relaed ! $e #ri*ae se"!r( %$i"$ %ill

i&"lude !*er"!)i& leislai*e( reula!r, a&d bureau"rai" !bsa"les-

I&*es)e& %ill als! be "e&ral ! e&suri& $a $e %elfare !f "ii9e&s is &!

"!)#r!)ised %i$ $e bude s#e"ifi"all, "ii& edu"ai!&( $eal$( se"uri,(


17/48

s!"ial a&d )u&i"i#al ser*i"es( %aer a&d sa&iai!&( ele"ri"i,( r!ads(

ele"r!&i" ra&sa"i!&s( s"ie&ifi" resear"$ as a be&efa"!r reardless !f $e

)!re dis"i#li&ed e.#e&diure a##r!a"$ !i& f!r%ard-

Bo" 2& Cost o( energy subsidies

$e& l!!+i& a $e #ri"e !f *ari!us e&er, #r!du"s l!ball, a&d $e&

"!)#ari& $!se ! $e #ri"es #aid b, e&d users i& Saudi Arabia( #er"e& !f GDPJ ! $e !*er&)e& i& 465>(

si&"e i )a+es u# a si&ifi"a& #!ri!& !f !al Saudi e&er, de)a&d- Diesel

"!&su)#i!& !aled a& e.#e"ed 266 $!usa&d barrels #er da, b#dJ i& 465>

42 #er"e& !f !al d!)esi" "!&su)#i!&J( $r!u$ is *aried use i&

ele"ri"i, e&erai!&( desali&ai!& a&d ra&s#!rai!&- A 50 US "e& #er lier

risi& ! 41 "e& #er lier i& 4650J a $e #u)#( $e #r!*isi!& !f as!li&e als!

re#rese&ed a&!$er )a?!r "!s ! $e Saudi !*er&)e&( a ar!u&d /-> billi!&

i& 465> 5-1 #er"e& !f GDPJ( %$e& "!)#ared ! #re*aili& i&er&ai!&al

as!li&e #ri"es- Ele"ri"i, e&erai!& re#rese& a si&ifi"a& "!s ! $e

=i&d!) %i$ ar!u&d 5-0 )illi!& barrels !f !il a&d refi&ed #r!du"s #er da,

are "!&su)ed ! )ee d!)esi" de)a&d- D!)esi" users #a, as l!% as US

"e& #er f!r ea"$ +il!%a $!ur !f ele"ri"i,( a si&ifi"a& dis"!u& !f 06

#er"e& %$e& "!)#ared ! i&er&ai!&al #ri"es- e esi)ae $a $e

!##!ru&i, "!s f!r $e !*er&)e& +ee#i& #ri"es a su"$ l!% le*els %as

e;ual /4 billi!& i& 465>- T$e Ele"ri"i, C!7 Ge&erai!& Reula!r,

Au$!ri, ECRAJ f!re"ass #ea+ ele"ri"i, de)a&d risi& b, 4> #er"e&

be%ee& 465>74646( s! e&erai!& "!ss %ill rise !!-


18/48

$e*enue

T!al re*e&ue is budeed a SR>51 billi!&- e a&i"i#ae $a ar!u&d 3

#er"e& !f !al re*e&ue %ill "!)e fr!) !il a& !ffi"ial re*e&ue brea+d!%&

%as &! #ublis$ed- As is $e &!r)( $e !il #ri"e a&d #r!du"i!& #r!?e"i!&s

used ! deri*e $e re*e&ue fiure %ere &! dis"l!sed- e "al"ulae $a !il

#r!du"i!& !f 56-4 )b#d a a #ri"e f!r Saudi e.#!r "rude !f /16- #b

e;ui*ale& ! ar!u&d /14-2 #b f!r Bre&J is "!&sise& %i$ $e !il re*e&ue

#r!?e"i!& i& $e "urre& bude- T$e !*er&)e& $as "!&sise&l, based is

#re*i!us budes !& "!&ser*ai*e !il #ri"e assu)#i!&s- O*er $e las fi*e

,ears( $e a"ual !il #ri"e $as a*eraed )!re $a& >6 #er"e& $i$er $a& $e

!&e used f!r $e bude- I& 465>( $!%e*er( $e !il #ri"e assu)#i!& used f!r $e bude %as /01-2 #b( $i$er $a& $e /1-0 #b ,ear7!7dae a*erae #ri"e

f!r Saudi "rude- Ne*er$eless( %i$ Bre& "rude "urre&l, radi& a /3 #b

see b!. J( %e $i&+ $a $e !il #ri"e assu)#i!& %as aai& redu"ed

si&ifi"a&l, "!)#ared ! $e 465> bude #ri"e !f /01-2#b( )ea&i& $e

!*er&)e& is !&"e aai& bei& "aui!us i& is assu)#i!&s f!r 4650 !il

#ri"es-

i$ $ese assu)#i!&s i& $e ba"+r!u&d( $e a&&!u&"ed re*e&ues are #r!?e"ed ! de"li&e b, 42-5 #er"e& "!)#ared %i$ $e #re*i!us ,earKs

bude- E*e& $!u$ %e a&i"i#ae $a #ri"es %ill be l!%er $a& i& 465>( %e

$i&+ $a re*e&ues %ill be "!)f!rabl, ab!*e $e !*er&)e&Ks assu)#i!&-

Re*e&ues e&erall, #r!*ide $e base fr!) %$i"$ e.#e&diure is "al"ulaed

"!&ser*ai*e budear, assu)#i!&s !& !il #ri"es a&d s#e&di& $a*e

"!&ribued ! $i$ le*els !f !*ers#e&di& i& re"e& ,ears- I& 4650( $!%e*er(

%e $i&+ $a $e !*er&)e& %ill be )!re #rude& i& is s#e&di&( %$i"$ %illli+el, )ea& l!%er le*els !f !*ers#e&di& "!)#ared ! $e bude-

Pr!?e"i!&s f!r &!&7!il re*e&ues %ere &! #ublis$ed- Fees a&d "$ares f!r

!*er&)e& ser*i"es a&d "us!)s ariffs are $e )ai& s!ur"es !f &!&7!il

re*e&ues- e a&i"i#ae re"ei#s fr!) b!$ !f $ese s!ur"es ! i&"rease

raduall, i& li&e %i$ )!re "areful )!&i!ri& !f i&"!)e re"ei#s as %ell as


19/48

$e $i$er de)a&d !& !*er&)e& ser*i"es- T$e #r!s#e" !f fur$er i&"reases

! i&eres raes i& $e US is li+el, ! i)#r!*e $e reur& !& !*er&)e&

f!rei& asses %$i"$ a""!u& f!r ar!u&d 0 #er"e& !f GDP( $!u$ %e d! &!

a&i"i#ae a si&ifi"a& #us$ $ere as $e i&eres rae ad?us)e& is li+el, ! beradual-

Bo" ,& -ad.a’s oil mar/et outloo/ (or 2016

T$e "urre& #eri!d !f l!% #ri"es is se ! re)ai& $r!u$!u 4650( #ulled

d!%& #ri)aril, as a resul !f #ersise&l, $i$ !il su##l,- All7 !u "!)#eii!&

be%ee& )e)bers !f OPEC %ill be $e )ai& reas!& f!r "!&i&ued

!*ersu##lied )ar+es- I& OPECKs re"e& )eei& $e &!i!&al idea !f #r!du"i!& ;u!as %as dr!##ed( #a*i& $e %a, f!r e*e& )!re i&e&se

"!)#eii!& i& a& alread, $ea*il,7!*ersu##lied )ar+e- E*e& as &!&7OPEC

su##l, bei&s ! sl!% duri& 4650 $e addii!&al su##l, "!)i& !&7li&e fr!)

Ira& %ill )ea& l!bal !il )ar+es %ill be l!!+i& a de)a&d ! lif #ri"es !u

!f $e d!ldru)s- i$ l!bal e"!&!)i" a"i*i, &! #i"+i& u# si&ifi"a&l, i&

$e ,ear a$ead( $is %ill ra&slae ! )!derae ,earl, r!%$ i& !il de)a&d-

OPEC daa s$!%s $a &!&7OPEC su##l, %ill de"rease b, 6-4 )illi!& barrels

#er da, )b#dJ( ,ear7!&7,ear( i& 4650- A)!&s $e lares &!&7OPEC

#la,ers( b!$ $e US a&d Russia %ill see ,ear7!&7,ear de"li&es i& #r!du"i!&-

F!r Russia( $e "!)bi&ai!& !f i&er&ai!&al sa&"i!&s #re*e&i& Russia& !il

"!)#a&iesK a""ess ! i&er&ai!&al fi&a&"e a&d !*er&)e& #r!#!sals f!r

$i$er "rude a.es ! b!!s sae re*e&ue %ill )ea& "rude #r!du"i!&( %$i"$

rea"$ed re"!rd #!s 7s!*ie le*els i& 465>( is e.#e"ed ! sl!% sli$l, i&

4650- A""!rdi& ! laes E&er, I&f!r)ai!& Ae&", EIAJ daa( !al US !il

#r!du"i!& %ill de"li&e b, 0 #er"e& !r 066 $!usa&d barrels #er da, b#dJ(

,ear7!&7,ear( i& 4650-

e f!re"as OPEC su##lies risi& b, ar!u&d 066 b#d ,ear7!&7,ear ! a*erae

!f 4-5 )b#d i& 4650- M!s !f $e OPEC rises are e.#e"ed ! "!)e fr!)


20/48

i&"reased Ira&ia& su##l, %$e& &u"lear7 relaed sa&"i!&s are lifed a s!)e

#!i& i& 5 4650- Al$!u$ Ira; sa% a& esi)aed 55 #er"e& i&"rease i&

#r!du"i!& ,ear7!&7,ear i& 465>( $is $as bee& aribued ! i&*es)e& i& $e

u#srea) se"!r si&"e 466- Fur$er subsa&ial i&"reases i& Ira;i #r!du"i!&%ill be )!re diffi"ul due ! $e "!u&r,Ks deeri!rai& fis"al siuai!& as a

resul !f l!%er !il #ri"es( $i$er )iliar, s#e&di&( a&d "!ss ass!"iaed %i$

"i*il "!&fli"-

Saudi Arabia& "rude #r!du"i!& is e.#e"ed ! a*erae 56-4 )b#d i& 465>(

sli$l, ab!*e !ur f!re"ased 56-5 )b#d Fiure 0J- e d! &! see Saudi

Arabia& #!li", "ui& #r!du"i!& i& !rder ! su##!r u#%ard )!*e)e& i&

#ri"es- S! far Saudi #!li", !f ai&i& )ar+e s$are $as %!r+ed %i$ l!%er #ri"es u&der"ui& b!$ OPEC a&d &!& 7OPEC "!)#ei!rs i& +e, )ar+es

a&d %e e.#e" Saudi #r!du"i!& ! be u&"$a&ed( ,ear7!&7,ear( a 56-4 )b#d

i& 4650 -

A""!rdi& ! OPEC daa( l!bal de)a&d %ill rise b, 5-4> )b#d i& 4650( ,ear7

!&7,ear( i& li&e %i$ $e a*erae !f $e las f!ur ,ears( su##!red al)!s

e&irel, b, &!&7OECD "!u&ries- ea+ !il de)a&d r!%$ i& $e EU a&d

,ear a*erae- As a resul %e see


21/48

li)ied u#side ! Bre& #ri"es duri& $e ,ear %i$ !ur re*ised f!re"as a /13

#b( d!%& fr!) /05 #b #re*i!usl,( f!r 4650

-ad.a )n*estment’s 2016 budget (orecast

e f!re"as a bude defi"i !f SR5-1 billi!& i& 4650( e;ui*ale& ! 54-0

#er"e& !f esi)aed GDP- O& $e re*e&ue fr!&( %e e.#e" !il #ri"es ! be

$i$er $a& $a used i& $e bude see B!. J a&d $eref!re !il re*e&ues %ill

e."eed $e budeed !al- e f!re"as !al !il re*e&ues "!&ribui& SR06

billi!& ! $e bude a&d &!&7!il re*e&ues "!&ribui& SR502 billi!&-

A"ual s#e&di& %ill be ab!*e $e budeed le*el- O*er $e las e& ,ears

a"ual !*er&)e& s#e&di& $as a*eraed 41 #er"e& $i$er $a& $e budeed

a)!u&- !%e*er( i& 465>( $e !*ers#e&di& rai! "a)e !u l!%er a 5-1

#er"e&- e e.#e" a&!$er de"li&e i& $e !*ers#e&di& rai! i& 4650 ! -2

#er"e&- e $i&+ su"$ a re&d %ill be fur$er e&f!r"ed i*e& $e e.#e"ed

#ressure !& !il re*e&ues a&d $e )!re #rude& e.#e&diure "!&r!l( !e$er

%i$ $e l!%er le*el !f budeed s#e&di& f!r 4650- e f!re"as !al

e.#e&diure !f SR44-1 billi!&-

T$e !il #ri"e le*el &e"essar, f!r re*e&ues ! bala&"e !ur f!re"as le*el !f

!*er&)e& s#e&di&( +&!%& as $e fis"al brea+e*e& !il #ri"e( is /22-1 #b f!r

Saudi e.#!r "rude e;ui*ale& ! ar!u&d /6- #b f!r Bre&J- T$is is based !&

!ur #r!du"i!& assu)#i!& !f 56-4 )b#d a&d a& !il e.#!rre*e&ue ra&sfer

rai! !f 2> #er"e&- e als! assu)e a 5 #er"e& r!%$ i& d!)esi" !il

"!&su)#i!& ! 4- )b#d i& 4650- e $i&+ $a f!r$"!)i& i&"reases i&

d!)esi" as #r!du"i!& s$!uld a+e s!)e !f $e burde& fr!) !il as $e fuelf!r d!)esi" e&er, "!&su)#i!& &e. ,ear- T$e )ai& r!%$ i& as !u#u

%ill "!)e fr!) $e asba$ a&d Arabi,a$ fields i& $e eas !f Saudi Arabia a&d

fr!) S$a,ba$ field i& $e E)#, uarer- B!$ asba$ a&d Arabi,a$ are

e.#e"ed ! #r!du"e &!&7ass!"iaed as %$i"$ %ill be #r!"essed b, $e asi


22/48

#r!"essi& #la&- T$ese #r!?e"s %ere su##!sed ! "!)e !&7li&e i& 465> bu

fa"ed e"$&i"al dela,s a&d s$!uld be !#erai!&al i& earl, 4650-

Budgetary per(ormance in 201

T$e re"e& a&&!u&"e)e& b, $e Mi&isr, !f Fi&a&"e als! re*eals $a $e

#reli)i&ar, 465> fis"al !uur&s %ere si&ifi"a&l, differe& $a& $e 465>

budeKs #r!?e"i!&s( a&d a li&e %i$ !ur #r!?e"i!&s- F!r $e firs i)e( a"ual

!il re*e&ues $a*e "!)e !u l!%er $a& budeed $e resul !f falli& !il #ri"es

/>4-4 #b f!r Bre& i& 465>( d!%& fr!) /-1 #b i& 4651J- T!al s#e&di& %as

aai& i& e."ess !f $e budeed #r!?e"i!&( leadi& ! a defi"i !f SR03

billi!&( $e lares defi"i !& re"!rd( e;ui*ale& !f 5> #er"e& !f GDP #er"e& l!%er $a& is 4651

le*el- e esi)aed $a $e 465> bude %as based !& a #ri"e f!r Saudi !il !f

/01-2 #b a&d #r!du"i!& !f -0 )b#d- A"ual #ri"e !f Saudi !il a*eraed /1

#b i& 465>( 12 #er"e& l!%er $a& is le*el i& 4651( a&d 55-4 #er"e& l!%er

$a& $a used i& $e bude- T$e a"ual le*el !f !il #r!du"i!& %as ab!*e !ur

f!re"ass- N!&7!il re*e&ues %ere SR50-> billi!&( u# b, 42- #er"e& !& $e

4651 !al( $e fases ,ear7!&7,ear r!%$ !& re"!rd- T$is is a dire" resul !f

$e !*er&)e&Ks eff!rs duri& $e ,ear i& i)#r!*i& $e "!lle"i!& !f fees

a&d a.es- F!r e.a)#le( a.es !& #er!leu) #r!du"s $a*e i&"reased b, 3

#er"e&( ,ear7!&7,ear des#ie $e lare dr!# i& !il e.#!r re*e&ues- A&!$er

s!ur"e !f r!%$ "a)e fr!) f!rei& i&*es)e& reur&s b, SAMA a&d $e

Publi" I&*es)e& Fu&d PIFJ( %$i"$ r!se fr!) a !al !f SR45- billi!& i&4651 ! rea"$ SR 3 billi!& i& 465>-

201 Budget ata

#S$ Billion%


23/48

E.#e&diure a)!u&ed ! SR3> billi!& billi!&- T$e !ffi"ial a&&!u&"e)e& aribues $e "urre& !*ers#e&di&

! addii!&al s#e&di& fr!) $e r!,al de"rees a&&!u&"ed i& ( %e $i&+ i %ill "!&i&ue !

e&ae i& $is ,#e !f s#e&di& i& $e s$!r7!7)ediu) er)( as i sill re)ai&s

aff!rdable ! d! s!- T$e !*er&)e& %ill( as a resul( be able ! "!&i&ue

s#e&di& !& +e, s!"ial a&d i&frasru"ure #r!?e"s( a&d a a le*el $i$ e&!u$


24/48

! su##!r r!%$ i& $e #ri*ae se"!r- T$a bei& said( %e esi)ae $a

"a#ial s#e&di& a""!u&ed f!r 5 #er"e& !f !al s#e&di& i& 465>( sill $i$

"!)#ared ! a& a*erae !f 42 #er"e& be%ee& 4661 a&d 4651- T$is ,#e !f

s#e&di& is "rii"al ! susai& r!bus r!%$ i& $e &!&7!il se"!r a&d $el# !lesse& $e de#e&de&"e !& $e !il se"!r as $e )ai& s!ur"e !f i&"!)e-

Di*ersifi"ai!& !f s!ur"es !f fis"al i&"!)e ra$er $a& fis"al defi"is s$!uld be

$e f!"us !f #!li",)a+ers i& $e =i&d!)-

As a resul !f $e bude bei& i& defi"i( $e !*er&)e& $as sared a series

!f )!&$l, s!*erei& b!&d issua&"e( all !f %$i"$ is d!)esi"( ! "!*er #ar !f

$e s$!rfall- T$e #ubli" deb i&"reased b, a &e !f SR3-3 billi!& ! SR514

billi!& b, $e e&d !f 465>( e;ui*ale& ! ?us >-2 #er"e& !f GDP Fiure 54J-e $i&+ $a au!&!)!us !*er&)e& i&siui!&s %ere $e )ai& subs"ribers

! $ese deb issua&"es- C!))er"ial ba&+ $!ldi&s !f !*er&)e& b!&ds( $e

"l!ses #r!., ! $eir $!ldi&s !f !*er&)e& deb( $a*e !&l, rise& b, SR43

billi!& !*er $e ele*e& )!&$s !f $e ,ear ! SR26 billi!&- A)!& $e

au!&!)!us !*er&)e& i&siui!&s( %e belie*e $e lares %! subs"ribers

%ere $e Ge&eral Ora&i9ai!& f!r S!"ial I&sura&"e GOSIJ a&d $e Publi"

Pe&si!& Ae&", PPAJ- As )e&i!&ed earlier( %e $i&+ $e !*er&)e& %ill"!&i&ue %i$ issui& )!re b!&ds ! ba&+s a&d !$er au!&!)!us !*er&)e&

ae&"ies ! fi&a&"e is s#e&di&- L!!+i& a$ead( $ere is a d!%&side ris+ $a

li;uidi, "!uld s$ri&+ fr!) fur$er !*er&)e& b!&d issua&"e( %$i"$ "!uld

resul i& a "r!%di& !u effe" !& "redi ! $e #ri*ae se"!r- $ile $is is &!

!ur baseli&e s"e&ari!( if su"$ a& e*e& d!es $a##e&( %e e.#e" $e !*er&)e&

! all!% !$er fi&a&"ial a&d &!&7fi&a&"ial i&siui!&s i-e- i&sura&"e

"!)#a&ies( i&*es)e& fir)s( a&d fa)il, !ffi"esJ ! #ari"i#ae i& #ur"$asi& #ubli" deb-

Economic per(ormance in 201


25/48

T$e Mi&isr, !f Fi&a&"e bude a&&!u&"e)e& i&"luded #reli)i&ar,

)a"r!e"!&!)i" daa( %$i"$ #r!*ides s!)e i&si$ i&! $e !*er&)e&Ks *ie%

!& e"!&!)i" #erf!r)a&"e $is ,ear a&d #r!s#e"s f!r &e. ,ear- Daa s$!%ed

$a !*erall e"!&!)i" r!%$ fell ! -1 #er"e& ,ear7!&7,ear( sl!%i& fr!)-> #er"e& ,ear7!&7 ,ear i& 4651- e $ad f!re"ased -4 #er"e& GDP r!%$

i& 465>- A""!rdi& ! $e bude sae)e&( $e !il se"!r re% b, #er"e&

,ear7!&7,ear i& 465>( #er"e& ,ear7!&7,ear !

a& a*erae !f 56-4 )b#d "!)#ared %i$ -3 )b#d i& 4651- B!$ $i$er "rude

e.#!rs( fr!) 3-5 )b#d i& 4651 ! a& e.#e"ed 3-1 )b#d i& 465>( a&di&"reased refi&er, !u#u led ! !il se"!r r!%$- As !il se"!r r!%$

a""eleraed( $e #a"e !f r!%$ i& $e &!&7!il e"!&!), did &! fare as %ell(

bu &e*er$eless re% b, -0 #er"e& Fiure 51J- i$i& $e &!&7!il e"!&!),(

r!%$ !f !*er&)e& ser*i"es sl!%ed ! - #er"e&-

!e non3oil pri*ate sector re% b, -3 #er"e&- e $ad a&i"i#aed a sl!%i&

#erf!r)a&"e i& 465> as &eai*e se&i)e& ass!"iaed %i$ l!%er !il #ri"es

a&d redu"ed !*er&)e& s#e&di& i)#a"ed busi&ess a&d "!&su)er

"!&fide&"e a&d ba&+sK dis"!)f!r i& $e le&di& e&*ir!&)e&- T$e daa

release s$!%ed $a $e ra&s#!r se"!r %!uld be $e fases r!%i& se"!rs

i& 465> a 0-5 #er"e& - C!&sru"i!& se"!r r!%$ %as r!bus a >-0 #er"e&

,ear7!&7,ear- N!&7!il )a&ufa"uri& re% b, -4 #er"e& ,ear7!&7,ear(


26/48

su##!red )ai&l, b, i)#r!*ed !*erall "a#a"i,( u# 4-> #er"e& ,ear7!&7,ear(

bu s#e"ifi"all, due ! a rise i& $i$er *alue addi& s#e"ial, "$e)i"als

"a#a"i,( u# > #er"e& ,ear7!&7,ear- T$e %$!lesale a&d reail se"!r als!

re"!rded )!des r!%$ a -2 #er"e&( refle"i& %ea+er se&i)e& relaed !l!%er !il #ri"es- Gr!%$ i& $e fi&a&"e se"!r %as als! i& li&e %i$

e.#e"ai!&s( a 4-0 #er"e&-

)n(lation %as #u a a& a*erae !f 4-4 #er"e&( "!)#ared ! 4-3 #er"e& i&

4651- T$is is i& li&e %i$ i&flai!& daa #r!du"ed !& a )!&$l, basis b, CDSI

a&d is $e l!%es si&"e 4660( %$e& i&flai!& rea"$ed 5- #er"e&- I&flai!& $as

re)ai&ed subdued relai*e ! #re*i!us ,ears( bu a re"e& a""elerai!& ! re&al

i&flai!& a&d $e &e%l, a&&!u&"ed re*isi!& ! d!)esi" e&er, #ri"es all #!i&! a li+el, u#%ard re&d &e. ,ear Fiure 5>J-

T$e current account re"!rded is firs defi"i si&"e 52 a /15- billi!& 0-4

#er"e& !f GDPJ( d!%& fr!) a sur#lus !f /30- billi!& i& 4651 Fiure 50J-

Al$!u$ a deailed brea+d!%& !f $e "urre& a""!u& is &! #ublis$ed( i is

"lear $a $e re*ersal i& $e "urre& a""!u& bala&"e is )!sl, due ! $e dr!#

i& !il re*e&ues !il re*e&ues a""!u& f!r ar!u&d 2 #er"e& !f !al "urre&

a""!u& re"ei#sJ- T$e fall i& Saudi !il e.#!r #ri"e fr!) />-2 #b i& 4651 !

/1 i& 465> #us$ed $e !il e.#!r re*e&ues ! /5>3 billi!&( d!%& fr!) /42>

billi!& i& 4651- N!&7!il e.#!rs als! fell b, 52-2 #er"e& ,ear7!&7,ear(

"!)#ared ! 0 #er"e& r!%$ i& 4651 Fiure 53J- T$e fall i& &!&7!il e.#!rs

%as )!sl, due ! a de"li&e i& #lasi" a&d rubber( a&d "$e)i"al #r!du"

e.#!rs- e see $a $e de"li&e i& !il #ri"es $as i&"reased #ressure !& Saudi

#er!"$e)i"als due ! l!%er !il #ri"es $a*i& redu"ed $e "!)#eii*e

ad*a&ae !f Saudi #er!"$e)i"al "!)#a&ies relai*e ! $eir i&er&ai!&al

"!)#ei!rs- Per!"$e)i"als a&d #lasi"s a""!u& f!r )!re $a& 06 #er"e& !f

$e =i&d!)Ks &!&7!il e.#!rs- I)#!rs %ere als! d!%& b, 56-> #er"e& ,ear7

!&7,ear( )!re $a& $e )!&$l, rade daa- Laes a*ailable daa f!r $e firs

e& )!&$s !f 465> s$!%ed $a i)#!rs %ere > #er"e& d!%& fr!) $e sa)e


27/48

#eri!d i& 4651- Daa !& $e !$er "!)#!&e&s !f $e "urre& a""!u& %ere &!

#ublis$ed-

!e economic outloo/ (or 2016

e e.#e" $a $e e"!&!), %ill "!&i&ue ! de"elerae i& 4650( draed

d!%& b, sl!%er r!%$ i& b!$ $e !il a&d &!&7!il se"!rs- A&&ual r!%$ i&

$e !il se"!r %ill re)ai& #!sii*e i& 4650 as as #r!du"i!& s$!uld su##!r

r!%$ i& $e se"!r- T$e &!&7!il #ri*ae se"!r %ill "!&i&ue ! r!% albei a

a sl!%er #a"e( as redu"ed !*er&)e& s#e&di& s$!uld "!&i&ue ! $a*e a

&eai*e i)#a" !& busi&ess a"i*i,- !%e*er( %e $i&+ $a !*er&)e& %ill

)ai&ai& a le*el !f s#e&di& $i$ e&!u$ ! "!&i&ue su##!ri& #!sii*er!%$ i& $e &!&7!il #ri*ae se"!r- $ile %e e.#e" $e NTP a&&!u&"e)e&

i& earl, 4650 ! i&"lude )a?!r i&iiai*es a&d ref!r)s ! si)ulae #ri*ae

se"!r a"i*i,( %e belie*e $a $e i)#a" !f $ese i&iiai*es %ill !&l, sar be

fel !%ards $e e&d !f $e ,ear- T$ese i&iiai*es are e.#e"ed ! i&"lude

i&*es)e& a&d &!&7!il e.#!r #r!)!i!&( as %ell as reula!r,(

ad)i&israi*e( a&d fi&a&"ial ref!r)-

E"!&!)i" r!%$ i& Saudi Arabia is f!re"as ! sl!% ! 5- #er"e& i& 4650(

!%i& ! a sl!%er r!%$ i& b!$ $e !il a&d &!&7!il se"!rs- Based !& $e

a*ailable daa( %e e.#e" !il se"!r r!%$ ! rea"$ 6- #er"e& des#ie a

)ari&al de"li&e i& !il #r!du"i!&- e $i&+ $a f!r$"!)i& i&"reases i&

d!)esi" as #r!du"i!& %ill su##!r $e r!%$ i& $e se"!r duri& 4650-

i$i& $e &!&7!il se"!r( %e e.#e" $e !*er&)e&Ks real GDP ! e.#a&d 4->

#er"e& ,ear7!&7,ear due ! !ur e.#e"ai!& !f "!&i&ued s#e&di& ! )ee

de)a&d !& !*er&)e& ser*i"es( %$ile $e &!&7!il #ri*ae se"!r is e.#e"ed! e.#a&d b, 4-2 #er"e&( sl!%i& d!%& fr!) -3 #er"e& i& 465>- e belie*e

$a $e #ri*ae se"!r %ill "!&i&ue ! feel $e se&i)e&al i)#a" !f l!%er !il

#ri"es( %$ile l!%er !*er&)e& s#e&di& %ill li)i a&, #!e&ial f!r a&

a""elerai!& i& r!%$ f!r s!)e busi&esses- Fr!) a se"!rial #!i& !f *ie%( %e


28/48

e.#e" ra&s#!rai!& a&d uiliies( $e )ai& be&efi"iaries !f !*er&)e&

s#e&di& !& +e, s!"ial i&frasru"ure( as %ell as $e ser*i"e based %$!lesale

a&d reail se"!r( ! be $e fases r!%i& se"!rs !f $e e"!&!), i& 4650-

I&flai!& is e.#e"ed ! re"!rd a& a""elerai!& i& 4650( bu re)ai& relai*el,

l!% "!)#ared ! #re*i!us ,ears- e $i&+ $a ref!r) ! e&er, #ri"es %ill be

a )a?!r dri*er f!r i&flai!& i& $e s$!r7er)- I& addii!&( $e $!usi& se)e&

$as bee& $e lares "!&ribu!r !%ards $eadli&e i&flai!& $r!u$!u 465>-

)!re $!)e7see+ers %ill "!&i&ue ! re& #r!#er, i& 4650 i& a&i"i#ai!& $a

aff!rdable $!usi& )a, be a*ailable s!!& f!r #ur"$ase- T$is s$!uld #us$ u#

de)a&d f!r re&al u&is a&d #u fur$er #ressure !& $e re&als f!r $!usi&

se)e&- e als! )ai&ai& !ur *ie% $a $ere %ill be s!)e l!"al i&flai!&ar,

#ressure as a resul !f $e $i$ le*el !f "!&su)er s#e&di&- Pressure !&

d!)esi" f!!dsuffs %ill li+el, re)ai& subdued as i&er&ai!&al f!!d #ri"es

"!&i&ue $eir deflai!&ar, re&d- Des#ie $e $ei$e&ed s#e"ulai*e radi&

aai&s $e Saudi Ri,al i& $e f!r%ard )ar+e( %e d! &! f!resee a&, "$a&es

! $e Ri,alKs #e ! $e D!llar- T$e sr!&er !ul!!+ f!r $e US D!llar a&d

$e #r!s#e" !f $i$er i&eres raes )a, als! #u fur$er d!%&%ard #ressure

!& #ri"es !f i)#!rs- Oil e.#!rs are f!re"as ! fall sli$l,( %$ile i)#!rs

%ill re)ai& u&"$a&ed fr!) $eir 465> le*el- I&*es)e& i&"!)e %ill rise( be&efii& fr!) $e $i$er i&eres rae e&*ir!&)e&- T$is %ill "ause $e

"urre& a""!u& ! re"!rd a s)aller defi"i a 0- #er"e& !f GDP-


29/48

lobal oil prices !a*e (allen s!arply o*er t!e past se*en mont!s' leading

to signi(icant re*enue s!ort(alls in many energy e"porting nations' .!ile

consumers in many importing countries are li/ely to !a*e to pay less to

!eat t!eir !omes or dri*e t!eir cars4

Fr!) 4656 u&il )id74651( %!rld !il #ri"es $ad bee& fairl, sable( a ar!u&d

/556 a barrel- Bu si&"e


30/48

If %e "u( $e i)#!rer "!u&ries %ill i&"rease $eir #r!du"i!& a&d $is %ill

)ea& a l!ss !f !ur &i"$e )ar+e( said E&er, Mi&iser Ale.a&der N!*a+-

Falli& !il #ri"es( "!u#led %i$ %eser& sa&"i!&s !*er Russia's su##!r f!r

se#araiss i& easer& U+rai&e $a*e $i $e "!u&r, $ard-

T$e !*er&)e& $as "u is r!%$ f!re"as f!r 465>( #redi"i& $a $e

e"!&!), %ill si&+ i&! re"essi!&-

F!r)er fi&a&"e )i&iser( Ale.ei =udri&( said $e "urre&",'s fall %as &! ?us a

rea"i!& ! l!%er !il #ri"es a&d %eser& sa&"i!&s( bu als! a s$!% !f

disrus ! $e e"!&!)i" #!li"ies !f $e !*er&)e&-

Gi*e& $e #ressures fa"i& M!s"!% &!%( s!)e e"!&!)iss e.#e" fur$er

)easures ! s$!re u# $e "urre&",-

e $i&+ "a#ial "!&r!ls as a #!li", )easure "a&&! be !ff $e able &!%(

said Luis C!sa( a se&i!r a&al,s a Cii-

$ile Preside& Pui& is &! usi& $e %!rd "risis( Pri)e Mi&iser D)ir,

Med*ede* $as bee& )!re f!r$ri$ !& Russia's e"!&!)i" #r!ble)s-

Fra&+l,( %e( sri"l, s#ea+i&( $a*e &! full, re"!*ered fr!) $e "risis !f

4662( $e said i& a re"e& i&er*ie%-

Be"ause !f $e %i& i)#a" !f falli& !il #ri"es a&d sa&"i!&s( $e said $e

!*er&)e& $ad $ad ! "u s#e&di&- e $ad ! aba&d!& a &u)ber !f

#r!ra))es a&d )a+e "erai& sa"rifi"es-

Russia's i&eres rae rise )a, als! bri& is !%& #r!ble)s( as $i$ raes "a&

"$!+e e"!&!)i" r!%$ b, )a+i& i $arder f!r busi&esses ! b!rr!% a&d

s#e&d-


31/48

8e&e9uela is !&e !f $e %!rld's lares !il e.#!rers( bu $a&+s ! e"!&!)i"

)is)a&ae)e& i %as alread, fi&di& i diffi"ul ! #a, is %a, e*e& bef!re

$e !il #ri"e sared falli&-

I&flai!& is ru&&i& a ab!u 06Q a&d $e e"!&!), is eeeri& !& $e bri&+ !f

re"essi!&- T$e &eed f!r s#e&di& "us is "lear( bu $e !*er&)e& fa"es

diffi"ul "$!i"es-

T$e "!u&r, alread, $as s!)e !f $e %!rld's "$ea#es #er!l #ri"es 7 fuel

subsidies "!s Cara"as ab!u /54->b& a ,ear 7 bu Preside& Madur! $as ruled

!u subsid, "us a&d $i$er #er!l #ri"es-

I'*e "!&sidered as $ead !f sae( $a $e )!)e& $as &! arri*ed( $e said-

T$ere's &! rus$( %e're &! !i& ! $r!% )!re as!li&e !& $e fire $a

alread, e.iss %i$ s#e"ulai!& a&d i&du"ed i&flai!&-

T$e !*er&)e&'s "aui!& is u&dersa&dable- A #er!l #ri"e rise i& 52 sa%

%ides#read ri!s $a lef $u&dreds dead-

Saudi Arabia: Price versus market share

Saudi Arabia( $e %!rld's lares !il e.#!rer a&d O#e"'s )!s i&flue&ial

)e)ber( "!uld su##!r l!bal !il #ri"es b, "ui& ba"+ is !%& #r!du"i!&(

bu $ere is lile si& i %a&s ! d! $is-

T$ere "!uld be %! reas!&s 7 ! r, ! i&sil s!)e dis"i#li&e a)!& fell!%

O#e" !il #r!du"ers( a&d #er$a#s ! #u $e US's bure!&i& s$ale !il a&d asi&dusr, u&der #ressure-

Al$!u$ Saudi Arabia &eeds !il #ri"es ! be ar!u&d /2> i& $e l!&er er)( i

$as dee# #!"+es %i$ a reser*e fu&d !f s!)e /366b& 7 s! "a& %i$sa&d l!%er

#ri"es f!r s!)e i)e-


32/48

I& er)s !f #r!du"i!& a&d #ri"i& !f !il b, Middle Eas #r!du"ers( $e, are

bei&&i& ! re"!&ise $e "$alle&e !f US #r!du"i!&( sa,s R!bi& Mills(

Ma&aar E&er,'s $ead !f "!&suli&-

If a #eri!d !f l!%er #ri"es %ere ! f!r"e s!)e $i$er "!s #r!du"ers ! s$u

d!%&( $e& Ri,ad$ )i$ $!#e ! #i"+ u# )ar+e s$are i& $e l!&er ru&-

!%e*er( $ere is als! re"e& $is!r, be$i&d Ri,ad$'s u&%illi&&ess ! "u

#r!du"i!&- I& $e 526s $e "!u&r, did "u #r!du"i!& si&ifi"a&l, i& a bid

! b!!s #ri"es( bu i $ad lile effe" a&d i als! badl, affe"ed $e Saudi

e"!&!),-

Opec: Not all are equal

Al!&side Saudi Arabia( Gulf #r!du"ers su"$ as $e U&ied Arab E)iraes a&d

=u%ai $a*e als! a)assed "!&siderable f!rei& "urre&", reser*es( %$i"$

)ea&s $a $e, "!uld ru& defi"is f!r se*eral ,ears if &e"essar,-

O$er O#e" )e)bers su"$ as Ira&( Ira; a&d Nieria( %i$ reaer d!)esi" budear, de)a&ds be"ause !f $eir lare #!#ulai!& si9es i& relai!& ! $eir

!il re*e&ues( $a*e less r!!) f!r )a&!eu*re-


33/48

T$e, $a*e "!)bi&ed f!rei& "urre&", reser*es !f less $a& /466b&( a&d are

alread, u&der #ressure fr!) i&"reased US "!)#eii!&-

Nieria( %$i"$ is Afri"a's bies !il #r!du"er( $as see& r!%$ i& $e res !f

is e"!&!), bu des#ie $is i re)ai&s $ea*il, !il7de#e&de&- E&er, sales

a""!u& f!r u# ! 26Q !f all !*er&)e& re*e&ue a&d )!re $a& 6Q !f $e

"!u&r,'s e.#!rs-

T$e %ar i& S,ria a&d Ira; $as als! see& Isis( !r Isla)i" Sae( "a#uri& !il

%ells- I is esi)aed i is )a+i& ab!u /) a da, $r!u$ bla"+ )ar+e sales7 a&d u&der"ui& )ar+e #ri"es b, selli& a a si&ifi"a& dis"!u& 7 ar!u&d

/6706 a barrel-


34/48

United States: Fracking boom

T$e r!%$ !f !il #r!du"i!& i& N!r$ A)eri"a( #ari"ularl, i& $e US( $as

bee& saeri&( sa,s C!lu)bia U&i*ersi,'s


35/48

C$i&a( %$i"$ is se ! be"!)e $e lares &e i)#!rer !f !il( s$!uld ai& fr!)

falli& #ri"es- !%e*er( l!%er !il #ri"es %!&' full, !ffse $e far %ider effe"s

!f a sl!%i& e"!&!),-


36/48

T$e dra)ai" de"rease i& !il #ri"es $a*e )!sl, $ur !il e.#!ri& "!u&ries'

e"!&!)ies i& $e f!ll!%i& %a,s:

5- Oil re*e&ue is a& i)#!ra& #ar !f fi&a&"i& !*er&)e& e.#e&diure-

T$eref!re( l!% !il #ri"es resul i& bude defi"is( f!r"i& !*er&)e&s ! see+

!$er s!ur"es ! fi&a&"e $e defi"i !r redu"e s#e&di&- T$e ab!*e fiure

s$!%s $e !il #ri"e &eeded ! bala&"e $e !il e.#!rersK budeJ-

4- L!%er !il #ri"es als! )ea& l!%er f!rei& "urre&", i&fl!%s( leadi& ! a

de"rease i& $e "!u&riesK f!rei& "urre&", reser*es- Al)!s all !il e.#!ri&

"!u&riesK e"!&!)ies de#e&d !& $e i)#!r !f !!ds !r ser*i"es a&d "urre&",reser*es fi&a&"e $is f!rei& rade- De"reasi& "urre&", reser*es %!uld lead

! de*aluai!& !f l!"al "urre&"ies aai&s )a?!r i&er&ai!&al "urre&"ies su"$

as $e d!llar a&d $e eur!-


37/48

OPEC( a "!&s!riu) !f !il7e.#!ri& &ai!&s( de"ided ! )ai&ai& $e "urre&

#r!du"i!& le*el a a )eei& i& N!*e)ber 4651 des#ie e.#e"ai!&s !f a

#r!du"i!& "u- Saudi Arabia 7 $e bies !il #r!du"er %i$ ar!u&d 6 #er"e&

;u!a !f $e !ra&i9ai!&'s !al #r!du"i!& See Fiure 4 bel!%J 7 bl!"+ed"alls f!r a #r!du"i!& de"rease fr!) #!!rer "!u&ries i& $e !ra&i9ai!&-

$, did $e "!u&r, !# &! ! "u #r!du"i!& Saudi Arabia is !&e !f $e

)ai& #la,ers i& $e !il )ar+e( su##l,i& 5475 #er"e& !f $e !al dail, !il

!u#u %!rld%ide- As $e se"!&d bies !il #r!du"er afer $e US( i %a&s !

#reser*e is s$are i& $e )ar+e a&d a "u i& #r!du"i!& %!uld $reae& $is

s$are( %$i"$ a+es a l!& i)e ! reai&-

T!e$er( OPEC "!u&ries "!&ribue ab!u 16 #er"e& !f !al dail, !il su##l,

%!rld%ide( lea*i& 06 #er"e& !f $e )ar+e s$are u&"!&r!lled a&d )a+i&

Russia a&d $e US Saudi Arabia's bies "!)#ei!rsJ d!)i&a& i& $e

)ar+e- T$ere is als! &! uara&ee $a a #ri"e i&"rease resuli& fr!) a

http://www.investopedia.com/terms/o/opec.asphttp://www.investopedia.com/terms/o/opec.asp


38/48

#r!du"i!& "u %!uld be e&!u$ ! ?usif, $e de"rease i& su##l, a&d bri& i&

$e !il re*e&ue $a is "ru"ial ! bala&"i& $e bude-

A&!$er #!ssible reas!& be$i&d $e de"isi!& ! )ai&ai& $e #r!du"i!& le*el

is $a Saudi Arabia %a&s ! +i"+ $e s)aller !il e.#!rers 7 %$! %!uld &! be

able ! )a&ae l!% !il #ri"es f!r !! l!& 7 !u !f $e a)e a&d $ereb,

i&"rease )ar+e s$are b, a "!u#le !f #er"e&ae #!i&s- I& $e s$!r ru&( all !il

e.#!ri& "!u&ries i&"ludi& Saudi Arabia are affe"ed b, $e l!% !il #ri"es-

Bu Saudi Arabia be&efis i& $e l!& ru& %i$ esi)aed "urre&", reser*es !f

ab!u /366 billi!&( all!%i& i ! bear "urre& l!% !il #ri"es f!r a fe% )!re

,ears-

L!% !il #ri"es als! i*e Saudi Arabia #!lii"al #!%er !*er !$er !il e.#!ri&

"!u&ries $a are is #!lii"al ri*als- F!r e.a)#le( Saudi Arabia "las$ed %i$

Russia a&d Ira& !*er $e S,ria& "!&fli" %$e& $e laer +e# su##!ri&

Bas$ar al7Assad's rei)e aai&s Saudi Arabia a&d is %eser& "!alii!&-

!e Bottom +ine

Saudi Arabia's lare "urre&", reser*es a&d d!)i&a& #!sii!& i& $e !il )ar+e

all!%s i ! )a&i#ulae $e "urre& s"e&ari! ! is fa*!r- T$e "!u&r,'s abili,

! !lerae l!% !il #ri"es f!r )u"$ l!&er $a& is "!)#ei!rs $el#s i s;uee9e

%ea+er "!)#ei!rs !u !f $e )ar+e a&d sre&$e& is #!lii"al #!sii!&

aai&s "!u&ries li+e Russia a&d Ira&-

TE !ld #ri"e( %$i"$ $i a fi*e7,ear l!% !&


39/48

fi&a&"ial "risis( bu $e #ri"e #ea+ed i& 4655 a&d $as bee& falli& e*er si&"e

see "$arJ- S!)e belie*e i "!uld ! bel!% /5(666 a& !u&"e $is ,ear-

T$e )!s i))ediae reas!& f!r !ldKs %!es is $e sr!& d!llar- G!ld is #ri"edi& d!llars( s! if $e A)eri"a& "urre&", !es u#( i&*es!rs )ar+ d!%& $e

,ell!% )eal a""!rdi&l,- A& added fa"!r is $a $e d!llar is risi& be"ause

!f $e re*i*al !f $e A)eri"a& e"!&!),( %$i"$ is bri&i& $e #r!s#e" !f

$i$er i&eres raes- T$a is bad &e%s f!r !ld- i$er i&eres raes i&"rease

$e !##!ru&i, "!s !f $!ldi& 9er!7,ield asses: $e )!&e, ied u# uselessl,


40/48

i& bulli!& "!uld be ear&i& a reur& if i&*esed i& reasur, bills !r !$er deb-

Sr!& "!r#!rae ear&i&s $a*e a si)ilar effe": %$e& di*ide&ds are e&er!us(

i $urs )!re ! )iss !u !& $e)-

T$e bi $!#e f!r !ld fa&s %as $a C$i&a( %$i"$ ai)s ! )a+e $e ,ua& i&!

a reser*e "urre&",( %!uld b!!s is !ld s!"+s ! $e $ef, le*els $eld b,

eser& "e&ral ba&+s( i& !rder ! )a+e i "redible i& i&er&ai!&al e,es- Bu

$is d!es &! see) ! be $a##e&i&- C$i&a $as raised is !ld reser*es a bi-

Bu is bulli!& $!ard is sill #u&,( a&d as a s$are !f !al reser*es( C$i&aKs !ld

$!ldi&s are falli&-

G!ld is als! sufferi& be"ause !f a s#ae !f u&usuall, !!d #!lii"al &e%s- T$eeur! 9!&eKs deal !& Gree"e $as redu"ed $e "$a&"e !f a )ess, defaul( a&d !f

$e brea+7u# !f $e si&le "urre&",- T$e &u"lear deal %i$ Ira& redu"es $e ris+

!f %ar %$i"$ e&ds ! b!!s !ldJ- I als! raises $e "$a&"es !f a br!ader

aree)e& !& !$er Middle Eas issues su"$ as S,ria- T$a lea*es #essi)is)

as $e )ai& reas!& f!r $!ldi& !ld- S!)e !ld bus belie*e $a $e s"ale !&

%$i"$ "e&ral ba&+s are "reai& )!&e, !u !f $i& air ;ua&iai*e easi&

i& $e ?ar!& !f )!&ear, #!li",J %ill e*e&uall, d!!) $e %$!le edifi"e !f

i&er&ai!&al fi&a&"e- Bu f!r &!% #ubli" "!&fide&"e i& fia )!&e, $a is:

"urre&", ba"+ed b, #r!)ises( &! #re"i!us )ealJ is u&di))ed- A&d( %as

sa,( if $e %!rld e"!&!), d!es i&deed "!lla#se "!)#leel,( lead i& $e f!r)

!f bullesJ )a, be )!re useful $a& !ld-

!rld%ide: !% as T$e Dr!# I& Oil Pri"es Affe"ed O$er C!))!diies

T$e effe"s !f $e dra)ai" dr!# i& $e #ri"e !f b!$ I"e Mar"$ Bre&( $e

i&er&ai!&al !il )ar+er( a&d is US "!u&er#ar N,)e. Mar"$ es Te.as

I&er)ediae( $a*e bee& %ides#read- T$is is i)#a"i& &! !&l, $e !il

ser*i"es i&dusr,( %$ere )a&, fir)s $a*e "u $eir "a#ial budes as %ell as

?!bs( bu als! a &u)ber !f )ar+es a"r!ss $e %!rld- T$e "!))!diies )ar+e(

i& #ari"ular( $as bee& %idel, affe"ed %i$ $e #ri"es !f )eals su"$ as


41/48

"!##er( lead a&d &i"+el dr!##i&( albei &! as dra)ai"all, as !il( a&d $e

#ri"e !f !ld i&"reasi&-

I& #assi&( i is %!r$ &!i& $a $e dea$ !f =i& Abdulla$ i&

#r!)#ed s!)e i&*es!rs ! be !& a "$a&e i& srae, as a resul !f $e

"$a&e i& $e leaders$i# !f Saudi Arabia( OPEC's lares #r!du"er a&d de

fa"! leader( %i$ Cr!%& Pri&"e Sal)a& su""eedi& =i& Abdulla$- !%e*er(

)a&, a&al,ss e.#e" =i& Sal)a& a&d Ali al7Nai)i( Saudi Arabia's !il

)i&iser( ! sa&d b, $e e.isi& Saudi !il #!li",( a leas i& $e &ear er)-

T$a is( ! all!% )ar+e f!r"es ! deer)i&e $e !il #ri"e a&d #ress a$ead %i$

u&resrai&ed #r!du"i!& !f "rude i& !rder ! e"li#se )!re )ari&al #r!du"ers

a&d ! &! ris+ l!si& )ar+e s$are( des#ie $e effe"s $a $is $as $ad !& $e

#ri"e !f !il-

9o. !as t!e drop in oil prices a((ected ot!er commodities:

i$ !il #ri"es d!%& )!re $a& >6Q si&"e


42/48

U&l!"+ "!))!di, )ar+e i&si$ &!% a&d subs"ribe ! !ur e)ail u#daes !r

!%e*er( "!!& $as $e lares #er7a"re e&er, "!ss !f all ari"ulural

"!))!diies s! i is li+el, ! see $e see#es falls- A""!rdi& ! a re"e&

re#!r fr!) S!"iee Ge&erale $e $is!ri"al "!rrelai!& be%ee& "!!& a&d

"rude is $e $i$es a"r!ss all "!))!diies a 6-1>:5-

T$e i)#a" !& )eals is )!re "!)#le.- A""!rdi& ! Ma";uarie alu)i&u)

#r!du"i!& $as $e $i$es e&er,7relaed "!ss a ar!u&d 16Q( "!##er $e

l!%es a 52Q %i$ !ld "!)i& i& se"!&d las %i$ 44Q !f #r!du"i!& "!ssrelaed ! e&er, #ri"es-

$ile ele"ri"i, a""!u&s f!r 16Q !f $e #r!du"i!& "!ss !f alu)i&u)( $e

)!s e&er, i&e&si*e !f $e base )eals( $er)al "!al is $e #red!)i&a&

#!%er7s!ur"e ra$er $a& "rude- !%e*er( duri& #eri!ds %$e& "rude #ri"es

are dri*e& ! e.re)e $i$s !r l!%s $e relai!&s$i# be%ee& "rude a&d

$er)al "!al be"!)e )u"$ "l!ser #!e&iall, leadi& ! a $i$er "!rrelai!&

be%ee& "rude a&d alu)i&iu) #ri"es-

G!ld als! $as a "!)#le. relai!&s$i# %i$ "rude- L!%er !il #ri"es( if refle"ed

i& a de"li&e i& fuel #ri"es "!uld i&"rease "!&su)er s#e&di& !& !ld ?e%elr,(

#ari"ularl, i& "!u&ries li+e I&dia %$! sa&d ! be&efi real, fr!) l!%er

"rude #ri"es- !%e*er i&*es)e& de)a&d f!r !ld "!uld de"li&e if l!%er !il #ri"es lead ! l!%er i&flai!&-


43/48

Ma";uarie &!e $a i& i& re"e& ,ears #lai&u)( sil*er a&d alu)i&u) $a*e $ad

$e $i$es "!rrelai!& %i$ !il #ri"es bu !*er $e l!&er er) #lai&u)(

"!##er a&d i& $ad $e $i$es "!rrelai!& %i$ !il #ri"es %i$ #alladiu) $e

%ea+es "!rrelai!&-

Fi&all,( $e effe" !& &aural as #ri"es is )!re dire"( a leas i& $e s$!r

er)- i$ as "!&ra"s li&+ed ! !il #ari"ularl, i& Eur!#e a&d AsiaJ a

de"li&e i& $e !il #ri"e %ill feed dire"l, i&! as #ri"es- I& $e U-S- $e de"li&e

i& !il #ri"e "!uld e&"!urae s$ale drillers ! use )!re as ris i& #refere&"e

!*er !il( i&"reasi& as su##lies a&d leadi& ! a fur$er dr!# i& as #ri"es-

Of $ese "!))!diies $ereKs %$a $a##e&ed si&"e "rude bea& is #lu&e i&

)id7


44/48

!%e*er( "!!& $as $e lares #er7a"re e&er, "!ss !f all ari"ulural

"!))!diies s! i is li+el, ! see $e see#es falls- A""!rdi& ! a re"e&

re#!r fr!) S!"iee Ge&erale $e $is!ri"al "!rrelai!& be%ee& "!!& a&d"rude is $e $i$es a"r!ss all "!))!diies a 6-1>:5-

T$e i)#a" !& )eals is )!re "!)#le.- A""!rdi& ! Ma";uarie alu)i&u)

#r!du"i!& $as $e $i$es e&er,7relaed "!ss a ar!u&d 16Q( "!##er $e

l!%es a 52Q %i$ !ld "!)i& i& se"!&d las %i$ 44Q !f #r!du"i!& "!ss

relaed ! e&er, #ri"es-

$ile ele"ri"i, a""!u&s f!r 16Q !f $e #r!du"i!& "!ss !f alu)i&u)( $e

)!s e&er, i&e&si*e !f $e base )eals( $er)al "!al is $e #red!)i&a&

#!%er7s!ur"e ra$er $a& "rude- !%e*er( duri& #eri!ds %$e& "rude #ri"es

are dri*e& ! e.re)e $i$s !r l!%s $e relai!&s$i# be%ee& "rude a&d

$er)al "!al be"!)e )u"$ "l!ser #!e&iall, leadi& ! a $i$er "!rrelai!&

be%ee& "rude a&d alu)i&iu) #ri"es-

G!ld als! $as a "!)#le. relai!&s$i# %i$ "rude- L!%er !il #ri"es( if refle"ed

i& a de"li&e i& fuel #ri"es "!uld i&"rease "!&su)er s#e&di& !& !ld ?e%elr,(

#ari"ularl, i& "!u&ries li+e I&dia %$! sa&d ! be&efi real, fr!) l!%er

"rude #ri"es- !%e*er i&*es)e& de)a&d f!r !ld "!uld de"li&e if l!%er !il

#ri"es lead ! l!%er i&flai!&-

Ma";uarie &!e $a i& i& re"e& ,earKs #lai&u)( sil*er a&d alu)i&u) $a*e

$ad $e $i$es "!rrelai!& %i$ !il #ri"es bu !*er $e l!&er er) #lai&u)(


45/48

"!##er a&d i& $ad $e $i$es "!rrelai!& %i$ !il #ri"es %i$ #alladiu) $e

%ea+es "!rrelai!&-

T$e s$ar# fall i& !il #ri"es a)id deeri!rai& se&i)e& !*er $e l!bal

e"!&!), $as )ade i&*es!rs %ear, !f i&*esi& i& !$er "!))!diies-

C!##er( i& #ari"ular( $as bee& $i *er, $ard( slu)#i& ! is l!%es #ri"e

le*els i& &earl, si. ,ears- T$is %as riered b, aressi*e selli& b, C$i&ese

$ede fu&ds earlier $is )!&$ %$e& $e )ar+e %as !& $e ede be"ause !f

$e "!lla#se i& $e !il #ri"e a&d %$e& #$,si"al de)a&d i& C$i&a %as %ea+ be"ause !f $e a##r!a"$i& lu&ar Ne% Year $!lida,- O$er )eals $a*e als!

a+e& a $i( %i$ &i"+el a&d lead e.#erie&"i& re"e& s$ar# de"reases-

As $e #ri"e !f !il $as dr!##ed( !ld( !& $e !$er $a&d( $as e.#erie&"ed is

$i$es #ri"e le*el si&"e Auus 4651 as )a&, i&*es!rs $a*e s!u$ ! i&*es

i& $e )ar+e ! #ar+ $eir "a#ial- i$ $e Eur! falli& ! a& 55 ,ear l!% as a

resul !f a &u)ber !f fa"!rs i&"ludi& $e S%iss Nai!&al Ba&+'s de"isi!& !

de"!u#le fr!) $e Eur! a&d $e Eur!#ea& Ce&ral Ba&+'s ;ua&iai*e easi&

)easures( !ld $as rise& *er, ;ui"+l,-

O& !# !f a r!%i& re&d f!r ba&+s ! dis#!se !f $eir "!))!diies

busi&esses( $ere is a debae %$e$er ba&+s %ill "!&i&ue ! fi&a&"e radi& i&

"!))!diies- Oil( a leas i& $e &ear fuure( is li+el, ! #r!*ide a l!% reur&%i$ )!s "!))e&a!rs $i&+i& $a $e #ri"e %ill &! rise subsa&iall, f!r

$e f!reseeable fuure( %i$ s!)e e*e& !i& s! as far as sai& $a $e #ri"e

%ill fall as l!% as USD46 #er barrel- T$eref!re( $e i&"e&i*e f!r ba&+s !

fi&a&"e $is #ari"ular "!))!di, %!uld a##ear ! $a*e falle& a%a,- T$is


46/48

"!uld see a s#a"e !#e& f!r &!&7ba&+ le&ders ! "!)e i&! $e )ar+e a&d #la,

a )u"$ )!re a"i*e r!le i& $e fi&a&"i& !f "!))!diies- T$ese e&iies are

e&erall, sub?e" ! less reulai!& a&d $a*e a""ess ! a )!re di*erse se !f

)e$!ds ! i&?e" "a#ial i&! fi&a&"i&s-

I)#a" !& e.isi& "!&ra"s

I& $e !il )ar+e( )a&,( if &! )!s #ari"i#a&s %ill e&er i&! $edi&

"!&ra"s aai&s a #ri"e flu"uai!&- !%e*er( $is is !fe& a $ede aai&s a

rise i& $e !il #ri"e a&d s!)e #ari"i#a&s %ill( as a resul !f $e "urre&"!&dii!&s( $a*e f!u&d $a $e, $a*e bee& as+ed ! )a+e )ari& #a,)e&s !

$ede "!u&er#aries as $e, are '!u !f $e )!&e,' !& $e $edi& "!&ra"-

E.i !#i!&s

Paries )a, fi&d i diffi"ul ! re)!*e $e)sel*es fr!) $eir e.isi&

"!))!diies "!&ra"s-

F!r"e Ma?eure: A f!r"e )a?eure "lause all!%s !&e #ar, %$! $as bee& sub?e"

! a #re7defi&ed e*e& ! sus#e&d #erf!r)a&"e u&der $e "!&ra"( !r ( i& a

%!rs "ase s"e&ari!( all!% !&e !r b!$ #aries ! er)i&ae $e "!&ra"- T$e

+e, #!i& ! &!e is $a #erf!r)a&"e b, $e affe"ed #ar, s$!uld be re&deredi)#!ssible ! #erf!r) s!)ei)es bei& se*erel, $i&dered is als! "!&sidered

! "!&siue f!r"e )a?eureJ- S!)e #aries )a, l!!+ ! rel, !& $is #r!*isi!&(

$!%e*er i is u&li+el, $a $e fall i& !il #ri"es %ill "!&siue a f!r"e )a?eure

e*e& u&der "!&ra"s-


47/48

Maerial Ad*erse C$a&e "lauses: T$ere is a #!ssibili, $a #aries "!uld l!!+

! )aerial ad*erse "$a&e "lauses i& $eir aree)e&s as a %a, !f er)i&ai&

$eir "!&ra"s- !%e*er( $ese "lauses are usuall, drafed ! "!&"er& $e sae!f $e i&di*idual "!&ra" #ari"i#a&s e-- a #ar,'s "redi rai&J ra$er $a&

)ar+e realiies- T$ese #r!*isi!&s are als! &!!ri!usl, diffi"ul ! rel, !& i&

$e e*e& !f a er)i&ai!&- Of "!urse( if a #ar,'s "redi rai&( f!r e.a)#le(

%ere ! be affe"ed be"ause !f $e fall i& !il #ri"es( $e& $is "!uld #r!*ide a&

!#i!& f!r $e !$er #ar, ! er)i&ae u&der $is ,#e !f #r!*isi!&-

$a "a& #aries d! ! "!u&er $e dr!# i& !il #ri"es

I )a, be #!ssible f!r #aries ! i&"lude( i& fuure "!&ra"s( a "lause %$i"$ is

effe"i*el, a '$ede' ! be riered b, a #re7deer)i&ed e*e& f!r i&sa&"e a

defi&ed rise !r fall i& $e !il #ri"e( e-- if !il dr!#s bel!% USD #er barrelJ-

T$is "!uld i*e #aries $e abili, ! re7#ri"e $e "!&ra" i& $is e*e&( !

e&sure $e "!&ra" re)ai&s e"!&!)i"all, *iable( !r a leas ! be !blied !e&er i&! !!d fai$ &e!iai!&s ar!u&d re7#ri"i&- De#e&di& !& $e le*el !f

barai&i& #!%er be%ee& $e #aries( i )a, e*e& be #!ssible ! i&"!r#!rae

su"$ a flu"uai!& as a er)i&ai!& e*e&-

E.isi& "!&ra"s "!uld als! be re*ie%ed ! see if $ere is $e #!ssibili, !f

a)e&di& $e) ! i&"lude su"$ a "lause( bu re7&e!iai& a& e.isi&"!&ra" %$i"$ d!es &! $a*e a "!&ra"ual )e"$a&is) f!r $is alread, buil i&

%!uld see) u&li+el,-


48/48

T$e full i)#a" a&d $e durai!& !f $e dr!# i& !il #ri"es re)ai&s ! be see&

bu %$a is "erai& is $a $is is a %!rr,i& i)e f!r $e "!))!diies )ar+e-

Paries %ill $a*e ! "!&sider $e er)s !f $eir e.isi& "!&ra"s as %ell as

"!&i&ui& ! "!&sider %a,s ! )iiae ris+ %$e& e)bar+i& !& ra&sa"i!&si& $e fuure- T$is "!uld i&"lude a re&e%ed relia&"e u#!& deri*ai*es as a %a,

!f #r!e"i& aai&s #ri"e a&d f!rei& e."$a&e ris+-

REFERENCE:

https:""###$rt$com"business"%&'%&()saudi)arabia)budget)oil"

http:""susris$com"&*+,"+&"&-"saudi)arabias)&*+.)/scal)budget)0ad#a"

http:""susris$com"&*+,"+&"&1"ro2al)decrees)on)states)budget)3or)/scal)2ear)&*+."

http:""###$bbc$com"ne#s"business)&-.(%.+&

http:""###$investopedia$com"articles"investing"*%+'+,"ho#)saudi)arabia)bene/ts)lo#)oil)

prices$asp

http:""###$economist$com"blogs"economist)e!plains"&*+,"*'"economist)e!plains)+'

http:""###$mondaq$com"!"%-.-+("Oil45as4Electricit2"6o#46as47he48rop49n4Oil4Pric

es4Aected4Other4;ommodities
https://www.rt.com/business/327324-saudi-arabia-budget-oil/http://susris.com/2015/12/29/saudi-arabias-2016-fiscal-budget-jadwa/http://susris.com/2015/12/28/royal-decrees-on-states-budget-for-fiscal-year-2016/http://www.bbc.com/news/business-29643612http://www.investopedia.com/articles/investing/031715/how-saudi-arabia-benefits-low-oil-prices.asphttp://www.investopedia.com/articles/investing/031715/how-saudi-arabia-benefits-low-oil-prices.asphttp://www.economist.com/blogs/economist-explains/2015/07/economist-explains-17http://www.mondaq.com/x/396914/Oil+Gas+Electricity/How+Has+The+Drop+In+Oil+Prices+Affected+Other+Commoditieshttp://www.mondaq.com/x/396914/Oil+Gas+Electricity/How+Has+The+Drop+In+Oil+Prices+Affected+Other+Commoditieshttps://www.rt.com/business/327324-saudi-arabia-budget-oil/http://susris.com/2015/12/29/saudi-arabias-2016-fiscal-budget-jadwa/http://susris.com/2015/12/28/royal-decrees-on-states-budget-for-fiscal-year-2016/http://www.bbc.com/news/business-29643612http://www.investopedia.com/articles/investing/031715/how-saudi-arabia-benefits-low-oil-prices.asphttp://www.investopedia.com/articles/investing/031715/how-saudi-arabia-benefits-low-oil-prices.asphttp://www.economist.com/blogs/economist-explains/2015/07/economist-explains-17http://www.mondaq.com/x/396914/Oil+Gas+Electricity/How+Has+The+Drop+In+Oil+Prices+Affected+Other+Commoditieshttp://www.mondaq.com/x/396914/Oil+Gas+Electricity/How+Has+The+Drop+In+Oil+Prices+Affected+Other+Commodities

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