Saudi Arabia predicts a budget deficit of 40 billion riyals ($10.7 billion) next year as the Arab world’s largest economy invests to create jobs and reduce its dependence on oil.

The government expects to spend 580 billion riyals, 7 percent less than this year, the Riyadh-based Finance Ministry said on its website Monday.
Revenue is expected to fall 26 percent to 540 billion riyals.
Saudi Arabia, the world’s largest oil supplier, is seeking to reduce an unemployment rate that is as high as 43 percent for Saudis between the age of 20 and 24. The government in August announced a five-year, $384 billion development plan focusing on education, housing and transportation.
The extra spending doesn’t mean “any change in terms of fiscal permissiveness,” Jarmo Kotilaine, chief economist at Riyadh-based NCB Capital, said in a telephone interview. “They are able to do this because oil prices have been trending up.”
Crude has risen more than 20 percent this year, to about $88 a barrel.
The ministry didn’t say what price it forecast when preparing next year’s budget.
Saudi Arabia can produce 12.5 million barrels of oil a day, and has been pumping only about two thirds of that amount since global demand dried up in the wake of the financial crisis.
The country had a fiscal surplus of 108.5 billion riyals this year, the ministry said, compared with the 70 billion-riyal deficit foreseen in the budget announced a year ago.
(Source: Bloomberg)