Saudi economic activity remains sluggish, says Al Rajhi Capital

The data from Saudi Arabian Monetary Authority (SAMA) for October indicates that Saudi economic activity remains modest, Al Rajhi Capital said in a recent report.

Credit to the private sector in October was flat on a sequential basis, while lending to the government entities grew 3.5 percent month-on-month (MoM) led by banks investment in government’s domestic sukuk issue in October, the brokerage firm said.

SAMA’s reserve assets, meanwhile, grew 1.7 percent MoM, marking the first sequential growth in four months, driven by the government’s $12.5 billion international bond sale by the end of September.

Consumer spending rose from the low base of last year, recovering from the impact of the temporary cut in public sector employees’ salaries and allowances.

Point-of-sale (PoS) transactions grew 15 percent (YoY), versus 6.4 percent in September; while ATM withdrawals increased 1.3 percent YoY.

“Concerns on the recent anti-corruption drive in the Kingdom have resulted in volatility in the market,” the brokerage said.

“However, the recent rating affirmation by S&P (A-/A-2 with a stable outlook) is likely to sooth investor concerns and reiterate that this reform though might create uncertainty in the short-term, is a positive move in the medium to long term,” it added.

Saudi Arabia estimates that the anti-corruption drive could yield $100 billion to the nation’s coffers, which is 57 percent of total government reserves.

Meanwhile, deposits slipped marginally in October (down 0.1 percent MoM), declining for the fourth consecutive month. The loan-to-deposit ratio, however, was flat at 82.46 percent.

Saudi Arabia’s fiscal deficit in third quarter 2017 stood at SAR 48.7 billion compared to SAR 46.5 billion in the previous quarter.

For the nine-month period, the deficit was SAR 121.5 billion, better (on a pro-rata basis) than that estimated by the government at the beginning of the year, Al Rajhi capital said.

Revenues in Q3 2017 climbed 11.7 percent YoY to SAR 142.1 billion, while expenditure rose 5.3 percent YoY to SAR 190.9 billion. In nine months, revenue increased 22.9 percent YoY to SAR 450.1 billion, while expenditure rose 0.4 percent YoY to SAR 571.6 billion, the report said.

The Kingdom’s current account balance stood at a deficit of $2.7 billion for Q2 2017 — the figure was revised from a surplus of $1.1 billion, the report said. Total remittances fell to $8.2 billon, the lowest reading in nearly four years.

Banking sector profits advanced 21.6 percent YoY in October 2017 to SAR 4.1 billion. The sector’s cumulative profit was to SAR 37.4 billion by October 2017, an increase of 3.7 percent year-to-date.

Saudi Arabia’s non-oil exports fell 2.1 percent in September, against a rise of 5.8 percent YoY in August. Non-oil imports were down 9.8 percent YoY in September, compared to the fall of 15.5 percent YoY the previous month, the report said.

The country witnessed deflation in October at -0.2 percent YoY, owing to the weakness in the food and beverages sector along with a decline in others such as housing, water, electricity and gas, transport, and household equipment.

On a monthly basis, the cost of living index fell in October, the report added.