Fiscal performance will remain closely tied to the fortunes of the oil sector, and no serious efforts to increase the tax base are expected. A generally pro-cyclical approach to fiscal policy will exacerbate the impact of the volatility of international oil prices. The government is planning to continue its fiscal expansion, including a marked increase in capital spending. Several factors will make it difficult to cut expenditure in 2011-15, including rapid population growth, the increase in global foodstuffs prices this year (which will push up spending on subsidies-especially in light of the protests elsewhere in the region), a growing wage bill as the bulk of new labour market entrants continue to be absorbed into the public sector, rising pension and other welfare costs, and commitments to education and healthcare. Nonetheless, the pace of spending growth is likely to be slower than it was during the 2003-08 oil boom. In December the Ministry of Finance announced that the budget recorded an estimated surplus of 6.6% of GDP in 2010-broadly similar to our own figure. With oil prices rising this year, we expect it to widen to 9.4% of GDP in 2011 (above our previous forecast, owing to an upward revision to our oil price projection). In 2012-15 increased spare capacity is likely to lead to steadily lower average international oil prices. Saudi oil production will increase, but much of the additional output will be consumed domestically. As a result, the budget surplus is forecast to fall from 6% of GDP in 2012 to 3% of GDP in 2015.