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Saudi non-oil sector ‘to see 4.3% growth this year’

RIYADH, August 3, 2021

Saudi Arabia's economy is recovering well from the pandemic, and the non-oil recovery that started in the second half of 2020 is expected to continue with non-oil growth projected at 4.3% this year, with overall GDP growth seen at 2.4%, a report said, citing a statement from the International Monetary Fund (IMF).

IMF expects that the private sector will lead the growth this year to reach 5.8% and it will continue in the medium and long term with an average growth of 4.8%, said Al Rajhi Capital, a leading financial services provider in the kingdom, in its new research report.
 
Further, oil exports increased by 146.7% year-on-year (y-o-y); while non-oil exports increased 70.0% y-o-y in May 2021. Non-oil exports segment-wise: “Plastics & Rubbers” increased by 82.9% y-o-y, accounting for ~35.4% of total non-oil exports, and “Chemical Products” rose by 86.4% y-o-y, accounting for ~31.7%.

Merchandise imports increased by 20.3% y-o-y in May 2021. This increase was due to the rise in many sectors compared to May 2020, mainly 'Vehicles and Associated Transport Equipment' (+36.4%) and 'Mineral Products' (+139.3%).
 
Meanwhile, the cost of living index remained in the positive trajectory and increased by 6.2% y-o-y in June 2021 (+5.7% y-o-y in May 2021), mainly driven by a rise in VAT from 5% to 15% in July 2020. Major support came from two segments, ‘Transport’ (+22.6% y-o-y) and ‘Food and Beverages’ (+8.1% y-o-y).

The increase in ‘Transport’ prices was mainly due to the rise in prices of ‘Purchase of Vehicles’ (+10.6%) and operating of personal transport equipment prices (+56.2%), which in turn was resulted by the increase in prices of fuels and lubricants (+110.7%). Further, the rise in ‘Food & Beverages’ was mainly due to the increase in food prices (+8.0%), in particular, the increase in prices of ‘Vegetables’ (+10.7%) and ‘Meat’ (+6.7%).

Further, remittances from Saudi nationals increased 56.0% y-o-y in June 2021 (+72.5% y-o-y in May); while remittances growth from non-Saudi national’s declined 3.4% y-o-y in June 2021 (+5.9% y-o-y in May).

The real estate price index rose by 0.4% y-o-y in Q2 2021 as compared to the increase of 0.3% y-o-y in Q1 2021, supported by rise in ‘residential’ real estate prices (+0.8% y-o-y); however, the increase in general index was partially offset by decline in ‘commercial’ and ‘agricultural’ real estate prices falling 0.5% and 0.2%, respectively.

Saudi Central Bank said that the money supply (M3) expanded 9.1% y-o-y in June, while M1 and M2 increased 8.2% y-o-y and 6.3% y-o-y, respectively. Credit to the private sector increased 16.8% y-o-y in June 2021, while bank claims on the public sector increased 9.6% y-o-y and the deposits grew by 10.2% y-o-y in June 2021.

POS transactions continued its uptrend, increasing 4.6% y-o-y in June 2021, primarily driven by increase in ‘Restaurants & Hotels’ (+96.7% y-o-y), ‘Clothing & Footwear’ (+19.9% y-o-y), and ‘Health’ (+14.2% y-o-y) segments. The spending in the local market, especially in the retail, food & beverages, and health segments continues to support the economy.

The banking sector's net profit before zakat and tax reported a rise of SR3.87 billion ($1 billion) in June against a loss of SR4.79 billion a year earlier. Meanwhile, mortgage declined 42.8% y-o-y in June 2021, impacted due to the Ramadan season in the region. House and Apartment mortgages fell 47% y-o-y and 5% y-o-y, respectively; while LDR came in at 77.8% in June 2021. Saudi Central Bank’s foreign reserves reported a slight decline of 0.4% y-o-y in June 2021 (-2.7% y-o-y in May 2021).

The Saudi Central Bank’s June statistics indicated that the macro-economic conditions are improving in the kingdom, with gradual increase in spending in the local market. The kingdom will open its doors to foreign tourists, and lift off the suspension of entry for tourist visa holders, starting from August 1, the Ministry of Tourism said. Further, Fitch Ratings has revised the Outlook on Saudi Arabia's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDR at 'A'. – TradeArabia News Service




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