Further rate cuts are expected in Saudi Arabia in 2009 as the economy witnesses slower growth, said Standard Chartered Bank as it forecast reverse repo rate to come down to 0.50 per cent by the second quarter.

The recent cuts in the repo and reverse repo rates have trickled into the interbank market, pushing rates down to 1.22 percent from the 2.48 percent at the start of the year, Standard Chartered said in a note on Thursday. It forecast the economy to grow 1 percent in 2009.

On Wednesday, the governor of the central bank Hamad Saud Al-Sayyari said Saudi Arabia was not in recession and that the bank would do what was necessary for the domestic economy.

Standard Chartered, noting that the 2009 budget assumed oil prices at $44 per barrel, said as long as oil prices stayed in that range Saudi's economy should be able to face the cyclical challenges.-Reuters