Saudi economy, financial sector resilient, set to drive recovery: SAMA

30/05/2021 Argaam


Saudi Arabia’s economy and financial sector remain well-positioned to respond to further developments and facilitate the path to recovery, according to the Saudi Central Bank (SAMA).

 

In its “Financial Stability Report 2021”, the apex bank said the Kingdom’s macroeconomic outlook remains relatively stable, supported by the government response to mitigate the adversity of the COVID-19 impact on the economy.

 

The domestic economy is expected to regain some upward traction, as a combination of the oil market recovery and policy measures bodes well for growth this year, the report noted.

 

The 2021 outlook for the non-oil sector is more positive as precautionary measures are likely to be lifted domestically, which should stimulate the wholesale and retail sectors amid vaccine rollout.

 

Meanwhile, the domestic banking sector has proven both operationally and financially resilient to the impact of the pandemic.

 

Credit extended by the banking sector has grown at a solid pace, primarily because of the high growth in retail real estate. Credit to micro, small and medium-sized enterprises increased, which was reinforced by the government’s packages to support the private sector, SAMA said.

 

Non-performing loans have risen on aggregate but remained low. Given the banking sector’s strong solvency position as measured by the domestic banks’ capital adequacy ratio, the banking sector is well-positioned to sustain any further potential deterioration in its asset quality.

 

On the other hand, the insurance sector fared well, while the health insurance segment remained positive despite the impact from COVID-19. However, motor insurance premium continued its decline for the fourth consecutive year.

 

Still, the insurance sector’s solvency has continued to display a strong standing, even though technical reserves witnessed a lower growth rate, the report added.

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