Citi expects wider Saudi budget gap amid spending rise Investing.com -- Citi noted that Saudi Arabia’s central government budget deficit increased significantly in the first quarter (1Q) of 2025, reaching SAR58.7 billion, compared to a deficit of SAR12.4 billion in the same period last year. The widening gap was attributed primarily to a decrease in oil revenues and an uptick in current spending. Oil revenues saw a notable decline of 19.3% year-over-year (YoY) in the first quarter, while non-oil revenues remained relatively flat. Specifically, taxes on goods and services, which compose about 60% of total non-hydrocarbon proceeds, experienced a marginal increase of 0.3% YoY in real terms. On the expenditure side, real spending rose by 3.2% YoY, with social benefits, financing expenses, and other expenses registering significant increases, despite a 21% YoY decline in capital spending. Citi analysts anticipate that the Kingdom’s budget deficit will expand from 2.5% of GDP in 2024 to 4.7% in 2025, surpassing the general consensus of a 4% deficit. Their projection for a 2025 deficit of approximately SAR225 billion also exceeds the official government forecast of SAR101 billion. The analysts suggest that the Kingdom’s strong fiscal position and precautionary buffers will facilitate the financing of a larger deficit, with borrowing strategies that include domestic and international debt capital markets, as well as private funding sources. The report also looked ahead to future global events that Saudi Arabia is set to host, such as the World Expo 2030, the FIFA World Cup in 2034, and the AFC Asian Cup in 2027, which are expected to maintain elevated spending pressures. Citi’s analysis includes both bullish and bearish scenarios for commodities, factoring in potential outcomes of a US-Iran deal and its impact on oil prices. In the bearish scenario with increased Iranian oil exports, the Saudi budget deficit could widen to 6.5% of GDP in 2025 and 7.8% in 2026. Conversely, in a bullish scenario without a US-Iran deal, the deficit could narrow to 1.9% of GDP in 2025 and 2.0% in 2026. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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U.S. goods prices seen "broadly rising" from April through September, Citi says Investing.com - U.S. goods prices are expected to broadly rise from April through September this year following the imposition of President Donald Trump’s sweeping tariffs, according to analysts at Citi. In a note to clients, the analysts projected that the levies, which include a minimum 10% levy for all U.S. imports and targeted rates of up to 50%, would combine with prior trade actions this year to translate into a roughly 19% increase in the overall effective tariff rate. This rate may rise should sectoral tariffs be announced in the coming days and weeks, the Citi analysts said. However, they noted that there remains "substantial uncertainty around the timing and magnitude of price jumps. The core Q4/Q4 personal consumption expenditures price index -- a measure of inflation closely watched by Federal Reserve policymakers who have recently flagged uncertainty around the impact of Trump’s tariffs -- is projected to end the year at 3.5%. The underlying consumer price index is anticipated to be "a bit higher," the analysts added. Markets are still attempting to understand if the Trump administration plans to impose the tariffs permanently or use them as a cudgle during negotiations with trading partners. On Monday, Trump said "both can be true." Trump has said he is not considering a pause on the tariffs to allow for negotiations with trading partners. But he noted that he was open to speaking with China, Japan and other countries. U.S. Trade Representative Jamieson Greer is due to tell the Senate Finance Committee on Tuesday that he has been approached by almost 50 countries asking to discuss Trump’s sweeping tariffs, according to media reports. Greer will say in written testimony that several of these countries, like Argentina, Vietnam, and Israel, have suggested they will bring down their tariffs and non-tariff barriers, Reuters reported.

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