Saudi forex reserves sufficient to support economic activities, says SAMA

The current level of Saudi Arabia’s foreign exchange reserves is at about 84 percent of gross domestic product (GDP), which is more than sufficient to support the Kingdom’s foreign exchange rate policy and economic activities, the Saudi Arabia Monetary Authority’s (SAMA) said in report.

However, precautionary measures and reforms are still necessary to counteract a sharp decline in reserves and oil price fluctuations, SAMA, the Kingdom’s central bank, added. The gradual implementation of these measures will help contain risks since fiscal developments correlate with key economic and financial indicators, such as inflation and economic growth.

Fiscal reforms should still be able to accommodate new investments and the aggregate demand level to avoid staling economic growth and to reduce deflationary pressures, SAMA added.

The main challenge facing the Saudi economy next year will arise from the global oil market; however, the Kingdom is capable of adapting to the drop in oil prices on the short-and medium-terms, thanks to its large reserves and its ability to finance through bonds.

SAMA added that the banking sector is robust, despite the slowdown in growth and lending, brought on by the falling oil prices. One of next year’s challenges for the sector is the decrease in quality of assets, the report said.