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Saudi Arabia Surpassing the Milestones

October 7, 2013 at 10:22 pm | News Desk

 

 tausif-rehman

Tausif-Ur-Rehman

The Kingdom of Saudi Arabia is the only Muslim country to exist in the G-20. It is also the fourth ideal destination for the foreigner expats. Saudi Arabia is the largest free market economy in the Middle East and North Africa holding 25 percent share of the total Arab GDP. The Kingdom’s geographic location provides easy access to export markets in Europe, Asia and Africa.   01_saudikinga

Despite regional socio-economic meltdown, deteriorating law and order situation in many parts of the region and political uncertainty, the Kingdom of Saudi Arabia’s macro-economy has surpassed the previous levels of productivity, efficacy, expansion and profitability. Prevalent societal divide in many key regional countries, the society of the Kingdom is united and harmonized. The system of governance has been at stake in many Arab countries, but in Saudi Arabia, the system is not only intact but also dynamic and articulated. According to many regional research studies and international monetary agencies data, its macro-economy’s major indicators are positive, stable and strong.

According to the IMF’s latest report (August, 2013) Saudi Arabia has had one of the best performing economies of the G-20 countries in recent years and has played a positive role in the global economy by stabilizing oil markets. The Saudi economy grew by 5.1 percent 2012 due to overall economic productivity having strong private sector growth, and government spending.

The report said that credit growth has remained strong, the banking system is well-capitalized and profitable, fiscal and current account surpluses remain large, and international reserves have grown.

20ssaudi_xlarge1The IMF’s report (August, 2013) expected a continued positive economic outlook for the Kingdom, with growth rate expected to continue at 4 percent during 2013.

Furthermore, the latest report also acknowledged the Kingdom as an important source of financial assistance and remittances for developing countries.

The IMF also praised the Saudi government’s efforts to strengthen fiscal management and its large investments in education and infrastructure.

SAMA Projections (2013-14)

Indicators of macro-economy 2011 2012 2013f 2014f 2015f
Nominal  GDP ($bn) 669.6 727.6 742.5 768.9 806.8
GDP Per Capita ($ 000) 23602.4 24789.9 24477.6 24516.6 24901.2
Real GDP % (CHANGE) 8.6 5.1 3.3 4.0 3.6
Non-Hydro-Carbon GDP 7.7 5.0 4.8 4.2 3.5
Commercial bank deposit   (SR bn) 1103.6 1215.0 1390.8 1571.6 1760.2
% Change 12.1 10.1 14.5 13.0 12.0
Commercial bank deposit   loan (SR bn) 890.2 1038.0 1173.0 1290.3 1393.5
% Change 10.2 16.6 13.0 10.0 8.0
CPI Inflation (% change) 3.7 2.9 4.0 4.1 4.2
Current Account balance   ($bn) 159.8 177.4 123.1 93.3 73.0
Fiscal revenue (SR bn) 1117.4 1239.5 1102.6 1032.5 989.6
% Change 50.7 109 -11.0 -6.9 -4.2
Fiscal spending (SR bn) 826.7 853.0 915.5 971.3 1029.4
% Change 26.4 3.2 7.3 6.1 6.0

Source: The Saudi Arabian Monetary Agency (SAMA)

In another local study conducted by the Riyadh-based Jadwa Investments (August, 2013), says that real GDP of the Royal Kingdom to expand by around 4.2 per cent and growth will be fuelled by the non-hydrocarbon sector as the oil GDP is expected to decline due to lower output and prices.  Furthermore, the non-oil private sector is expected to rise by around 5.3 per cent while the government sector will grow by 4.3 per cent.

The monthly bulletin of the SAMA (August, 2013) says that in nominal terms, Saudi Arabia’s GDP will expand by around 3.3 per cent to  SR2,819 billion in 2013 from SR2,727 billion in 2012. GDP in current prices would climb to a new record of SR 2,905 billion in 2014 according to the said report. The earnings would remain far above budgeted revenues of SR829 billion. It will create a much bigger actual fiscal surplus of nearly SR177 billion, nearly 20 per cent the budgeted surplus of SR 9 billion. It is hoped that the high surplus would allow Saudi Arabia to further trim its public debt to just around SR90 billion at the end of 2013 from SR99 billion at the end of 2012 and nearly SR135 billion at the end of 2011.   1309849604

Whereas, the SAMBA report (September, 2013), non-oil GDP growth may reach to 4.8 percent this year to 3.5 percent in 2015 which would be good sign for the macro-economy of the Kingdom in the days to come. The following given diagrams clearly show the elements of stability and sustainability exist in the national economy of Saudi Arabia.

Its wise leadership played remarkable role in the onward march of socio-economic prosperity. They introduced many meaningful short, medium and long term economic policies and financial reforms to make their economy competitive in the region and at international stage alike. Numerous schemes of socio-economy have already raised the levels of qualitative life, education, shelter, health and above all trust between the people and the prevailing system in the country.

Many ongoing mega industrial projects have further strengthened the productivity ratios. Ratios of FDIs, activities of construction, employment generation, higher education, consumer price stability, and the last but not the least increase in wages has merged the Kingdom as one of the ideal country to live in.  camelo

Government spending on people’s welfare has been one of the key priorities since its inception. It is now paving its dividends. Its federal budget has been remained surplus which has been used on different mega projects of social development throughout the country.

Education, health care, housing and infrastructure have been main sectors of government spending in the past so many years. Women empowerment is slowly but surely on the increase. Now women are in government positions ranging from ministerial levels to the Shoura Council.

Fitch’s Saudi Arabia’s rating (September, 2013)

Most recently, Fitch Ratings has affirmed Saudi Arabia’s Long-Term foreign and local currency Issuer Default Ratings (IDRs) at “AA-“. The Outlook is Positive. Fitch has also affirmed Saudi Arabia’s Country Ceiling at “AA” and Short-Term foreign currency IDR at “F1+”.

Fitch Ratings said Saudi Arabia’s external balance sheet has been bolstered so far in 2013. Central bank net foreign assets, the bulk of sovereign foreign assets, are up by 4.4 percent of GDP over the first seven months of the year and with no sovereign external debt, the net external creditor position is likely above 100 percent of GDP (from 96 percent of GDP at end-2012). Double-digit current account surpluses are expected each year to 2015, which will further bolster the external position.  imagesCA0YZI2O

In case of fiscal out-look, its ratios have been enhanced, with rising government deposits and falling government debt over the first seven months of the year reinforcing a net creditor position that is the second-strongest of all Fitch-rated sovereigns.

Capital adequacy and loan-loss coverage were up (at 17.9 percent and 166 percent, respectively) and NPLs had fallen to 1.63 percent. Banks remain liquid and the sector is well regulated. Risks arising from the banking sector are judged to be low.

The Global Competitiveness Report (2013) again upholds Saudi Arabia position among top 20 most competitive countries and maintains its first position in the region. The latest Fitch Ratings (2012-2013), shows the Kingdom’s political and financial stability. The Kingdom is determined to continue modernizing its infrastructure and accelerating economic activities in order to realize diversification of the sources of income.

The official figures showed the surge in nominal GDP boosted its per capita income to around $20,244 in 2011 from $15,246 in 2009 and expected it to reach $19,449 in 2012. It expected the assets to further swell to $1,128 trillion at the end of 2016 and break another record of $1,213 trillion at the end of 2017. According to the official report (April, 2012), foreign investments in Saudi Arabia jumped to $34 billion in 6 years.

The official data (SAMA) showed that the inflation rate in Saudi Arabia was recorded at 3.70 percent in July of 2013. Inflation Rate averaged 2.80 percent from 2000 until 2013, reaching an all-time high of 11.10 percent in July of 2008 and a record low of -2 percent in January of 2001.

CPI/ Different categories %
Foodstuffs and beverages 26
Renovation, rent, fuel   and water 18
Transport and   telecommunication 16
Home furniture 11
Fabrics, clothing and   footwear 8
Education and entertainment 6
Medical care 2
other expenses and   services 13

Source: The Saudi Arabian Monetary Agency (SAMA).

The National Commercial Bank, releases the D&B Business Optimism Index survey       (August, 2013) for Saudi Arabia for Q3 in Jeddah according to which inflation in Saudi Arabia is moderating. “Due to strengthening of the dollar 2013 imported inflation dropped significantly. There is also an increase in local capacity, which will help moderate the level of inflation in the range of 3.7 percent to 3.8 percent in 2013.

The Current Account outlook (2013) 366734471637

According to latest report of SAMA (September, 2013), the fiscal and current account positions have similar profiles. The current account is expected to record healthy surpluses over the next three years. It recorded a Current Account surplus of 34310 USD Million in the first quarter of 2013 by SAMA. Its Current Account averaged 14965.58 USD Million from 1971 until 2013 reaching an all-time high of 90060.70 USD Million in December of 2005 and a record low of -27509.30 USD Million in December of 1991.

Saudi foreign Assets at all-time high

The Saudi Arabian Monetary Agency (SAMA) June, 2013 said that Saudi Arabia’s foreign assets reached above the SR2.6 trillion mark for the first time. The assets controlled by the SAMA, peaked at an all-time high of around SR2.601 trillion (Dh2.57 trillion) at the end of May compared with about SR2.485 trillion (Dh2.46 trillion) at the end of 2012. It showed the assets, comprising investment in foreign securities, deposits with banks abroad and other funds, swelled by nearly 4SR43 billion month-on-month as they stood at around SR2.558 trillion at the end of April.

Moreover, net foreign assets are projected to reach well over $1 trillion by the end of 2015, equivalent to 130 percent of GDP. The Saudi Arabian Monetary Agency (SAMA) the net foreign assets increased by nearly $94 billion to its highest level of $560 billion at the end of 2011 $466 billion at the end of 2010. Year-on-year, SAMA’s assets were higher by a staggering SR362 billion as they stood at SR2.239 trillion at the end of May 2012. The assets were also higher by around SR900 billion compared to their level at the end of 2008 and nearly triple their level at the end of 2000.

According to the kingdom’s largest bank (March, 2013), Saudi Arabia’s budgeted fiscal surplus for 2013 could end the year nearly 30 times higher because of an expected surge in oil export earnings as a result of high prices.

Saudi exports surge

A report released by the Central Department of Statistics and information (CDSI), June, 2013 revealed that the value of nonoil exports stood at SR 190.95 billion which represented 32.73 percent of the Kingdom’s total imports in 2012. Saudi commodity exports rose by 6.5 percent last year valued at SR 1.45 trillion compared to SR 1.36 trillion in 201. Based on the CDSI report, the value of Saudi imports increased by 18.2 percent to reach SR 583.47 billion compared to SR 493.44 billion in 2011.

The value of nonoil exports stood at SR 190.95 billion which represented 32.73 percent of the Kingdom’s total imports in 2012. For comparison reasons, nonoil exports of the Kingdom valued at SR 41.14 billion in 2003, which represented 26.31 percent of the total imports at the time, the report said. The overall exports stood at SR 1.45 trillion.

 

Saudi Exports (Year-2012)  Amount SR billion
Asian countries(non-Arab   and Islamic) 784.39
North American countries 218.09
European Union 176.21
GCC 96.34
Islamic countries   (non-Arab) 62.54
other countries 118.91

 

Saudi Imports (Year-2012)  Amount SR billion
Asian countries(non-Arab   and Islamic) 198.43
North American countries 87.34
European Union 147.52
GCC 38.80
Islamic countries   (non-Arab) 30.85
other countries 80.50

Source: Ministry of Finance

Healthy Contribution of Private Sector

According to the latest report of the central department of statistics and information of Saudi Arabia (2012-2013), the private sector growth, at 9.9 percent, outpaced the state sector’s 3.6 percent expansion. Private sector GDP amounted to SR112.91 billion in the fourth quarter compared to SR102.75 billion in 2010. Moreover, the construction sector expanded 13.3 percent because of a real estate boom and heavy government spending on infrastructure. Saudi Arabia’s exports increased by 32 percent to reach SR38.61 billion compared to SR29.30 billion in the same period last year while the weight of the imports of Saudi Arabia amounted to 4507,000 tons against 3135,000 tons in the same period of last year, an increase of 44 percent.

 

News Desk

Economic Affairs Editor

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