Saudi economic growth is set to slow further in 2016 after the OPEC heavyweight announced record deficits due to a slump in oil prices, an economic report said Wednesday.
Jadwa Investment forecast the Saudi economy would grow by just 1.9 percent next year, down from 3.3 percent this year and 3.5 percent in 2014.
The world's top oil exporter announced Monday a record budget deficit of $98 billion in 2015 and projected a shortfall of $87 billion next year.
Jadwa expects the oil sector to grow by a meagre 0.9 percent on an average crude production of 10.2 million barrels per day.
To finance the budget, the Saudi government withdrew from its huge fiscal reserves and issued bonds on the domestic market.
The reserves dropped from $732 billion at the end of 2014 to $628 billion in November, Jadwa said.
The kingdom is estimated to have issued domestic bonds worth around $30 billion since July, raising public debt to $38 billion, or 5.8 percent of Gross Domestic Product, Jadwa said.
This year also saw the first deficit in the kingdom's current account since 1998, at $41.3 billion or 6.2 percent of GDP, it said. The slide is expected to continue next year.
To counter the shortfalls, Riyadh introduced unprecedented hikes to the prices of fuel, electricity and other utilities by as much as 80 percent, reducing decades-old subsidies.
Jadwa estimated the cost of energy subsidies at $61 billion this year, of which diesel accounted for $23 billion and gasoline for $9.5 billion.
Jadwa estimated the oil price used to calculate oil income in 2016 at $40.3 a barrel, down from $64.8 a barrel this year. The actual price of Saudi oil in 2015 averaged $49 a barrel.
It said that investment spending in next year's budget was cut by 19.3 percent to $59 billion.
Revenues in 2015 dropped to $162 billion, the lowest since the global financial crisis in 2009, due to a massive $123 billion fall in oil revenues.
The contribution of oil income to revenues dropped to just 73 percent in 2015, from an average of 90 percent in the past decade.
Jadwa expected the Saudi government to announce a National Transformation Programme (NTP) in January to outline further plans to boost non-oil income.