Saudi Arabia’s current account balance achieved a surplus of $17.7 billion in the first quarter of 2023, according to the figures published in the monthly report of the Saudi Central Bank (SAMA) for the month of July.
The current account is one of the components of the balance of payments, which reflects the overall picture of the country’s transactions with the outside world. It includes exports, imports, financial transfers, travel expenses and revenues, as well as investment expenses and revenues. The second component is the financial account, which includes the flow of investments, debt, and other capital transactions.
The surplus in the current account shrank in the first quarter of the year compared to the same period last year, when it amounted to $39.6 billion, due to the decline in oil revenues, as a result of the OPEC Plus decision to cut oil production.
However, the significant rise in net inflows from tourism activities gives an indication of the progress made in the Saudi government’s income diversification efforts.
The figures included in the SAMA report showed a significant increase in revenues from tourism activities, amounting to about $9.8 billion in the first quarter of 2023, compared to about $3 billion in the same period last year.
“With more Saudis spending their vacations at home, the tourism balance was firmly in surplus at $6 billion, compared with a small deficit a year earlier (and quite large deficits historically). The surge in tourism revenues mainly reflects the release of pent-up demand from religious pilgrims, and the expansion of hotel capacity to accommodate them. Visits from non-religious tourists are also gathering pace, albeit from a low base,” Jadwa Investment said in a report published this month.
The simplification of procedures also played a role in the tourism balance, as obtaining a visa became more flexible. The report also pointed to a noticeable increase in the number of tourists from the Gulf countries and foreigners, as well as local tourists, as many of them spend their vacations in the Kingdom.
Jadwa Investment’s report noted that historically, Saudi Arabia has tended to record decent current account surpluses, with an annual average of 4.5 percent of GDP for the past ten years.
“There have been times where the current account has slipped into deficit, most notably following the slump in oil prices in 2014 and more recently during the Covid-19 pandemic. However, the position returned to surplus in 2021 and improved to 13.6 percent of GDP in 2022, the highest ratio since 2013,” it added.
