Saudi Current Account in Deficit in 2024 Despite High Oil Prices

It is unusual for Saudi Arabia to run a current account deficit. This happened on only three occasions in the 25 years between 1999 and 2023: in 2015, 2016, and 2020. Low oil prices were the main cause of these deficits – the average price of Brent was $53 per barrel, $45/bbl, and $43/bbl, respectively. In 2024, however, the current account was in a deficit despite an average oil price of $80/bbl.

Source: International Monetary Fund

The current account balance swung from a surplus of $35 billion in 2023 to a deficit of $6 billion in 2024. The decline in the oil price from $82/bbl in 2023 to $80/bbl in 2024 is estimated to have contributed about $5 billion to this $41 billion swing. The rest of the change is due to three factors:

• Lower oil export volumes. Crude oil export volumes (the number of barrels of oil exported) were considerably lower in 2024 than in 2023 (an average of 6.1 million barrels per day compared to 6.7 mb/d) because of the effects of the OPEC+ production agreement. Lower oil export volumes are estimated to have accounted for $19 billion or close to half of the deterioration in the current account balance between 2023 and 2024.
• Surging imports. Imports of goods grew by $13 billion or 12% between 2023 and 2024, accounting for close to one-third of the current account deterioration. The strong import growth reflected the significant spending on the Vision 2030 projects, which are import intensive, and robust private consumption growth.

• Increased worker remittance outflows. Outflows of worker remittances increased by $8 billion or 20% in 2024, accounting for about 20% of the current account deterioration. Expatriate workers tend to remit a high share of their wages to relatives in their home country. Over the past two years, there has been a large inflow of expatriate workers into Saudi Arabia, and this was reflected in higher worker remittance outflows.

Small offsets to these three big areas of current account deterioration were provided by the travel and the government services balances. The surplus on travel increased by $1 billion in 2024 as tourism credits (spending by nonnationals on tourism activities in Saudi Arabia) grew by 14%. The deficit on the government services balance improved by nearly $2 billion in 2024 as government spending on services provided by nonresidents declined, continuing a trend that has been evident in recent years.

What Happens Next?

The small current account deficit in 2024 is of little concern given the large stock of foreign exchange reserves held by the Saudi Central Bank. Nevertheless, a larger deficit can be expected this year, and the International Monetary Fund has recently forecast that Saudi Arabia will run current account deficits of $40 billion to $50 billion a year (3% to 4% of gross domestic product) out to 2030. With oil prices falling in recent months, oil export revenue will be lower in 2025 than in 2024 even allowing for an increase in the number of barrels of oil exported as OPEC+ moves to ease its production cuts. Much, however, will depend on the reaction of the government and the Public Investment Fund to the drop in oil revenue. If they pare back spending, it is likely that imports and the employment of expatriate labor will decline, with the latter implying lower remittance outflows. This will help reduce the extent of the deterioration in the current account deficit but will not reverse it. A return to surplus will require a rebound in oil prices and increased oil exports, an unlikely combination at this time.

A period of current account deficits will limit Saudi Arabia’s ability to make large new investments overseas. The current account surpluses generated during 2021-23 were used to make new foreign investments. Without these surpluses, the acquisition of new foreign investments will become more dependent on raising debt or equity capital overseas, the liquidation of existing foreign assets, or the willingness to allow reserve assets of the central bank to decline, all of which have their limits. At current oil prices, the world should expect that Saudi capital invested overseas will be less abundant than it has been in recent years.

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