Tuesday 27 July 2021

Saudi Arabia gradually eases economy: report

RIYADH, June 30, 2020

The Saudi Arabian government has eased the economy after approximately two months, with gyms, restaurants and malls working with 50%-70% customers, said a report.

However, the travel and tourism sector may take some time to revive as people will tend to avoid, both inbound and outbound, travelling for the next few months, said Al Rajhi Capital, a leading financial services provider in the Kingdom, in its latest Economic Research report.

As per the latest data by Saudi Arabian Monetary Agency (Sama), the impact of the COVID-19 pandemic was witnessed in May 2020, the report said.

Further, according to a new projection from the International Monetary Fund (IMF), Saudi Arabia's GDP is expected to contract by 6.8% this year due to low oil prices and the adverse effect of the coronavirus pandemic on the economy. The monthly data released for May showed that the banking sector profits fell 39.4% y-o-y (-10.7% m-o-m) in May.

POS transactions declined 15.7% y-o-y as compared to the decline of 33.0% y-o-y in April. SAMA foreign reserves witnessed a y-o-y decline in growth (-13.1% in May Vs -11.2% in April). Furthermore, remittances by Saudi Nationals witnessed a negative growth of 52.1% y-o-y in May as compared to 41.6% y-o-y in April.

However, credit to the private sector continued to show a healthy growth (+10.7% y-o-y in May 2020 Vs +11.7 y-o-y in April 2020) along with 48% y-o-y growth in residential mortgage finance by banks Vs 26% y-o-y in April.

Further, credit to public sector enterprises grew by 6.1% y-o-y. Meanwhile, deposits grew 10.4% (+1.8% m-o-m), which was mainly driven by the ‘Business and Individual’ segment. Going forward, Saudi Arabia would be working to activate the role of the private sector to drive economic growth in the post-COVID-19 pandemic period, which is expected to be a vital contributor to the overall economic growth.

The ministry of tourism planning to start a tourism development fund with an initial capital investment of SAR 15bn, to diversify the Kingdom’s economy and attract more foreign travellers and also create more job opportunities. Overall, we believe that the Saudi Arabian economy will continue to improve, supported by the government’s commitment to boost the non-oil sector.

Meanwhile, the cost of living index continued to be in a positive trajectory in May (+1.1% y-o-y Vs +1.3% y-o-y in April). The growth in the Saudi Arabian money supply continued its uptrend in May at +10.2% y-o-y, supported by the rise in both M1 and M2.

Further, the Index of Industrial Production increased 11.4% m-o-m in April (-0.4% m-o-m in March), mainly due to the strong activity in two sectors namely, ‘Mining and Quarrying’ and ‘Electricity & Gas’ sectors’. – TradeArabia News Service


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