Saudi Arabia’s credit to the private sector rose on a monthly basis for the first time in five months in January 2018 reflecting a 0.2 per cent increase month-on-month (m-o-m), said Al Rajhi Capital, a top financial services provider.
Deposits remained broadly unchanged on a sequential basis in January, Al Rajhi added its latest Saudi Arabian Economy report.
POS spending (+4.3 per cent y-o-y) grew at the slowest rate in seven months as implementation of VAT and fuel price hike resulted in more rationalized spending. Meanwhile, the Saudi Arabian Monetary Authority (Sama) reserves witnessed a monthly drop in January 2018 after climbing for the past three months, which may be attributable to the government’s investment activities.
The Kingdom is likely planning to tap international bond market for the third straight year in order to finance the fiscal deficit as well as refinance the $10 billion sovereign loan (issued April 2016). Meanwhile, the Kingdom’s cost of living index (base year changed to 2013 from 2007) recorded a positive reading for the first time in almost a year in January 2018, owing to introduction of VAT and higher domestic gasoline prices.
Kingdom introduced the new bankruptcy law as part of the structural reforms carried out under Vision 2030. The law includes general regulations, preventive actions, measures for financial restructuring and settlement procedures. The move will help attract foreign direct investments in the Kingdom, according to the Al Rajhi report.
Sama total reserves fell on a monthly basis in January 2018, after rising for three consecutive months. Meanwhile, the deposits remained broadly unchanged on a monthly basis (+1.2 per cent y-o-y), whereas credit to the private sector rose 0.2 per cent m-o-m in January (-1.0 per cent y-o-y).
Credit to the Building & Construction sector was down 14.9 per cent y-o-y by the end of Q4 2017, while credit to the Transportation and Communications, and Commerce sectors was up 17.8 per cent and 4.1 per cent, respectively. Government reserves with Sama stood at SR615.8 billion ($164 billion) (including Government current account) as of January 2018, recording a monthly fall of 4.0 per cent.
Banking sector profits dropped 4.3 per cent y-o-y to SR4,167 million in January 2018. On a monthly basis, the banking sector profits jumped 60.7 per cent in the same month (Figure 15).
Money Supply (M3) jumped 1.4 per cent y-o-y in January 2018 to SR1,794.7 billion, compared to the annual rise of 0.2 per cent in the previous month, supported by the rise in M1. On a sequential basis, M3 rose for the third month in a row in January 2018.
The Kingdom raised SR7.22 billion in February through domestic sukuk issuance under its local currency sukuk program. The government raised SR5.37 billion of 5 year bonds, SR1.70 billion of 7 year bonds and SR150 million of 10 year bonds.
Point-of-sale (POS) transaction rose, albeit at a slower pace of 4.3 per cent y-o-y in January 2018, down from the rise of 28.1 per cent y-o-y last month. ATM transactions climbed by 1.8 per cent y-o-y in January 2018 compared to the rise of 2.4 per cent y-o-y in the previous month.
Index of Industrial Production (IIP) climbed by 3.06 per cent q-o-q in Q3 2017, backed by the rise in ‘Mining and Quarrying’ sector (~74.3 per cent of the total index). The index has witnessed a steady rise for the first three quarters of 2017.
Remittances by Saudi nationals rose by 24.7 per cent y-o-y in January 2017, whereas remittances by non-Saudi nationals fell by 17.7 y-o-y for the same period.
Crude oil prices (Brent April futures contract) dropped 5.6 per cent m-o-m in February 2018, owing to concerns over the rise in US shale oil production. Meanwhile, Saudi Arabia’s crude oil production grew on a sequential basis in January 2018 after dropping for the past two months.
Kingdom’s non-oil exports rose by 18.2 per cent y-o-y in November 2017 (+13.1 per cent y-o-y in October 2017), whereas the non-oil imports fell by 8.2 per cent y-o-y in November 2017 (+2.3 per cent y-o-y in October 2017).
Cost of living index (base year changed to 2013 from 2007) entered the positive territory for the first time in almost a year in January 2018 at +3.0 per cent y-o-y, due to the introduction of VAT and the rise in domestic gasoline prices. On a monthly basis, the index rose by 3.9 per cent in January 2018 as against the rise of 0.3 per cent m-o-m in December 2017