Saudi government defends economic health despite pressure from historically low crude oil prices. Photo by Fedor Selivanov/Shutterstock
RIYADH, Saudi Arabia, Jan. 11 (UPI) -- The Saudi government said Monday its financial house is in order despite the negative pressure exerted by historically low crude oil prices.
The Saudi Arabian Monetary Agency said there were some misconceptions about the overall economic backdrop in the oil-rich country, adding any long-term concerns were largely speculative in nature.
"Saudi Arabia's key economic and financial indicators are stable, as reflected by its net creditor position with a sound and resilient banking system," it said in a statement.
Lower crude oil prices, down more than 60 percent from mid-2014, are hurting economies from exporting nations like Saudi Arabia that depend heavily on crude oil prices. The Saudi Finance Ministry reported total revenue for fiscal year 2015 at $162 billion, an estimated 15 percent decline from budgeted revenues. Oil revenues are expected to reach $118 billion, a decline of 23 percent from the previous year.
In a rare move, the government in December said it was setting up a $48.7 billion stimulus package to support projects designated as national priorities because of "excess" volatility in crude oil prices.
Crude oil prices are trading near 10-year lows as production outpaces demand amid slow global economic growth. The Saudi government in the past has defended a robust production guideline, saying demand could return during the latter half of this year.
A December report from consulting firm McKinsey & Co. finds the oil-rich kingdom may need to diversify its economy, however, amid the sustained slump in crude oil prices.
"The country can no longer rely on oil revenue and public spending for growth, in the face of a changing global energy market and a demographic transition that will significantly increase the number of working-age Saudis by 2030," it said. "The current labor participation rate is 41 percent, and productivity growth of 0.8 percent annually from 2003-13 trailed many emerging economies."
Citing a Saudi government reform agenda that includes privatization of some economic sectors, Saudi Aramco, the world's largest oil company, announced plans last week to list its shares on the public market for the first time ever.
Officially known as the Saudi Arabian Oil Co., the company said it would allow "broad public participation" in its shares through an initial public offering.