"Public finance figures for 3Q FY 2013/14 (October to December) reveal a large jump in government spending compared to 2Q, driven by a rise in current spending," the reads the NKB's weekly economic brief report.
The report, however, pointed out that expenditure is still not particularly high for this stage of the year and within the overall total, capital spending continues to disappoint.
"Ultimately, underlying spending growth could end up at around 8-9 percent this year, but strong oil revenues will ensure another huge budget surplus of more than 20 percent of GDP." The NBK noted that total government spending reached KD 9.6 billion in the first nine months of the fiscal year, surging KD 4.5 billion from the first six months and up 18 percent from a year earlier.
It stated that most of this increase came from current spending, which rose 20 percent y/y and almost doubled from its end-2Q levels.
"Although large, the increase in current spending is not especially surprising: due to reporting issues, it can be volatile on a quarter-to-quarter basis. Moreover, because current spending accounts for around 90 percent of all spending, its volatility has a large impact on the spending figures overall," added the report.
"More than half of the increase in current spending came from the large 'miscellaneous transfers' component, which jumped to KD 5.0 billion from KD 2.6 billion at end-2Q. Although details for the entire period are not available, it looks likely that the jump was driven by a rise in transfer payments to the state social security fund, PIFSS." The report concluded that "as an inter-departmental transfer, this proportion of the increase in spending has limited significance for the domestic economy." "As such, 3Q's large rise in spending overstates the stimulus to the economy." The data also showed that the capital spending still widely below the aspired-after level.
"By contrast, recorded capital spending remained soft in December. Although it rose by KD 0.3 billion to KD 0.7 billion in 3Q from 2Q, it actually fell 4 percent y/y. Moreover, at below 27 percent of the full year budget, the rate of capital spending remained subdued for this stage of the year," reads the NBK report.
"Ultimately, we expect recent signs of progress on a number of small and large capital projects to filter through to more upbeat official spending data - though perhaps not until next year." The NBK estimated the total government revenues at KD 24.0 billion in December, down slightly in year-on-year terms.
"The fall is largely a result of the softening in oil prices over the past year, which has reduced oil revenues. This more than offset a notable rise in non-oil revenues, likely generated by payments from the
"But at KD 14.3 billion, the surplus remains extremely large. Moreover, part of the decline is probably due to the expenditure timing issues mentioned above. If so, this effect should even out by the end of the year, possibly through a smaller than usual upward adjustment to spending in the end year accounts.
"Ultimately, we expect a full year budget surplus of around 23 percent of GDP, only slightly down on the 25 percent recorded in FY12/13." (end) fnk.ibi KUNA 171926 Feb 14NNNN
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