Saudi economic activity tepid in Oct: Al Rajhi

The data for October from the Saudi Arabian Monetary Agency (Sama) indicated that Saudi economic activity remained tepid during the month, said Al Rajhi Capital, a top financial institution in the kingdom.

Credit to the private sector was flat on a sequential basis, while lending to the government entities grew 3.5 per cent m-o-m led by bank’s investment in Government’s domestic sukuk issue in the month of October (SR10 billion ($2.66 billion)).

Meanwhile, Sama reserve assets grew 1.7 per cent month-on-month (m-o-m), marking its first sequential growth in four months, which could be attributable to the government’s $12.5 billion international bond sale by the end of September. Consumer spending jumped from the low base of last year, which was impacted by the temporary cut in public sector employees salaries and allowances.

POS transactions grew 15 per cent y-o-y (vs. 6.4 per cent in September), while ATM withdrawals increased 1.3 per cent y-o-y. Concerns on the recent anti-corruption drive in the Kingdom have resulted in volatility in the market. However, the recent rating affirmation by the S&P (credit ratings at “A-/A-2” with a stable outlook) is likely to sooth investor concerns and reiterate that this reform though might create uncertainty in the short-term, is a positive move in the medium to long term.

According to Saudi officials, the anti-corruption drive could yield $100 billion to the nation’s coffers, which is 57 per cent of total Government reserves. Deposits slipped marginally (-0.1 per cent m-o-m), down for the fourth consecutive month, but the loan- to- deposit ratio was flat at 82.46 per cent. In another reform measure, the Saudi Government has approved a plan to issue first tourist visas to foreign travellers beginning 2018.

Sama total reserves rose on a monthly basis in October 2017, after falling for three months in a row. Meanwhile, the deposits fell by 0.5 per cent y-o-y (-0.1 per cent m-o-m), whereas credit to the private sector declined 1.5 per cent y-o-y in October (0.0 per cent m-o-m) (Figure 11 & 12). Government reserves with Sama stood at SR655.5 billion (including Government current account, + 2.3 per cent m-o-m), as of October 2017.

Kingdom issued SR6.68 billion from its fourth domestic sukuk sale launched in October. The Kingdom raised SR1.05 billion of 5 year bonds, SR3.53 billion of 7 year bonds and SR2.1 billion of 10 year bonds. The issue was 296 per cent oversubscribed and received nearly SR19.8 billion orders.

Saudi Arabia’s Q3 2017 fiscal deficit stood at SR 48.7 billion compared to SR46.5 billion in the previous quarter. For the period 9M 2017, the deficit was reported as SR121.5 billion, better (on a pro-rata basis) than that estimated by the government at the beginning of the year. For Q3 2017 revenues climbed by 11.7 per cent y-o-y to SR 142.1 billion, while expenditure rose by 5.3 per cent y-o-y to SR 190.9 billion.