JEDDAH – The flow of credit from commercial banks to private sector in the Saudi economy remains strong, Al Rajhi Capital said in its research on Saudi economy for the month of February this year. The report said commercial banks' total claims on private sector grew at 15.9 percent YoY in January compared to 16.4 percent YoY in December. Loans, advances and overdrafts increased 16.2 percent YoY whereas investment in private securities moved up 14.5 percent YoY in January. On the monthly basis, loans, advances and overdrafts increased 1.3 percent in January. Overall, commercial banks' claims on private sector moved up 1.2 percent MoM supported by 1.4 percent MoM rise in investment in private securities. Credit growth in 2012 was higher at 16.4 percent compared to 10.6 percent in 2011. Total outstanding credit to the private sector stood at SR999 billion at the end of the last year. Loans, advances and overdrafts stood at SR951 billion and investment in private securities was SR38.6 billion at the end of December 2012. In terms of GDP, loans, advances and overdrafts was just 35 percent in 2012. However, the ratio was almost 100 percent if we took non-oil private sector GDP instead of total GDP. Deposits growth also eased a bit from 14.2 percent YoY in December to 13.7 percent YoY in January. On the monthly basis, deposits growth was just 0.4 percent due to decline in time and savings deposits. Demand deposits grew by 1.1 percent MoM in January against a solid growth of 6.9 percent MoM in December. Time and savings deposits growth turned aroun from 4.7 percent MoM in December to -0.3 percent MoM in January. Measures of money supply growth eased a bit in January after a jump in the previous month. M1 growth moderated to 14.7 percent YoY in January compared to 16.6 percent YoY in December. The moderation in M1 was mainly due to decline in demand deposits growth from 17.6 percent YoY in December to 15.5 percent YoY in January. M2 growth also decelerated slightly from 13.6 percent YoY to 13.2 percent YoY during the period on the back of M1 growth, even as time and savings deposits growth accelerated from 6.2 percent YoY to 9.1 percent YoY. M3 growth moved down from 13.9 percent YoY to 13.4 percent YoY during the same period. The moderation in money supply growth was mainly due to turn around in demand deposits even as time and savings deposits growth accelerated. On the monthly basis, demand deposits grew 1.1 percent in January compared to 6.9 percent in December. This resulted into slow down in M1 that grew 1.1 percent MoM in January compared to 5.9 percent MoM in December. On the monthly basis, time and savings deposits declined 0.3 percent in January, similar to the pattern in previous years. Moreover, M3 grew 0.5 percent MoM in January compared to 4.8 percent MoM in the previous month, the report said. For the entire year 2012, M1 and M2 growth slowed down whereas M3 accelerated slightly compared to the year 2011. M1 grew 16.6 percent in 2012 compared to 21.6 percent in 2011 whereas M2 growth slowed to 13.6 percent from 15.4 percent. On the other hand, M3 growth moved up from 13.3 percent in 2011 to 13.9 percent in 2012. The broader slowdown in M1 and M2 can be attributed to slowdown in demand deposits and currency outside banks. Growth in currency outside banks slowed down from 25.6 percent in 2011 to 11 percent in 2012 whereas demand deposits growth slowed down from 20.9 percent to 17.6 percent during the period. On the other hand, time and savings deposits accelerated from 2.4 percent to 6.2 percent. Growth in other quasi-monetary deposits also moved up significantly from 0.4 percent in 2011 to 16 percent in 2012. Besides, foreign reserve assets increased SR21 billion in January to reach at SR2484 billion. The composition of the reserves also witnessed an adjustment. Investment in foreign securities increased from SR1670 billion in December to SR1735 billion in January whereas foreign currency and deposits declined from SR734 billion to SR689 billion during the period. In the entire year of 2012 the assets have increased by SR434 billion, an increase of 21.4 percent from 2011 levels. Investment in foreign securities constituted 68 percent of the total reserve assets whereas foreign currency and deposits abroad constituted 30 percent. Remaining reserves were held as Special Drawing Rights (SDR), gold and reserves with IMF, Al Rajhi Capital further said. The foreign reserve asset is almost 90 percent of GDP which provides strong support to the external sector of the country. Moreover, the reserve can finance more than four years of import at the current rate of around SR540 billion per year. – SG
