IMF raises Saudi economic growth forecasts
The IMF in its World Economic Outlook report has raised Saudi Arabia’s 2018 and 2019’s growth forecasts to 1.6 per cent and 2.2 per cent respectively (50bps and 60bps higher than the previous estimates), owing to the recent rally in oil prices, a report said.
Sama (Saudi Arabian Monetary Authority) reserve assets rose sequentially for the third month in a row in December, supported by higher oil prices, as well as debt issuances by the Government, added the latest Economic Research from Al Rajhi Capital, a leading financial services provider in Saudi Arabia.
Meanwhile, private sector credit declined (-1.4 per cent m-o-m) in December, while bank claims on the public sector continued to rise (+0.9 per cent m-o-m). Total deposits increased (+1.2 per cent m-o-m) due to the rise in both demand and time & saving deposits, resulting in a lower LDR of 80.1 per cent in December from 82.0 per cent in November.
Consumer spending was strong, as indicated by the 28.1 per cent y-o-y jump in POS spending, on the back of the low base effect of December 2016, caused by the cut in public sector employees’ salaries and allowances in October 2016.
Meanwhile, inflation was positive for the second consecutive month in December (on an annual basis) and is likely to rise further in coming months due to the impact of energy price reforms and VAT implementation, which came into effect from January, 2018.
Sama total reserves grew on a monthly basis in December 2017, rising for the third straight month. Meanwhile, the deposits edged up 0.1 per cent y-o-y (+1.2 per cent m-o-m), whereas credit to the private sector fell 0.9 per cent y-o-y in December (-1.4 per cent m-o-m) (Figure 11, 12, 13 & 14). Government reserves with Sama stood at SR641.4 billion ($171 billion) (including Government current account) as of December 2017, registering a sequential increase of 1.9 per cent.
Banking sector profits slipped 29 per cent m-o-m to SR2.6 billion in December 2017 (+150 per cent y-o-y). The sector’s 12-month profit totalled to SR43.7 billion by December 2017, a rise of 8.2 per cent y-o-y. On a q-o-q basis in Q4, bank profits were down 8 per cent (+36 per cent y-o-y coming off a lower base), coming lower than market consensus estimates, possibly implying higher than expected impairment costs.