Finance & Capital Market

Saudi economy picks up after pandemic contraction

Saudi Arabia’s GDP is expected to decline by 4.2% year-on-year (y-o-y) in the third quarter (Q3) of 2020 as compared to -7% y-o-y in Q2 2020, indicating an improvement and recovery of the economy from the pandemic, a report said.

On a seasonally adjusted quarterly basis, GDP grew by 1.2% in Q3 2020, added the report by Al Rajhi Capital, a leading financial services provider in Saudi Arabia, citing a rapid estimate by the General Authority for Statistics.

The money supply (M3) expanded 10.8% y-o-y in October, supported by a rise in M1 and M2, increasing 11.7% and 10.0%, respectively. Credit to the private sector also increased 15.9% y-o-y in October, while bank claims on the public sector advanced 15.6% y-o-y in October and the deposits grew by 10.9% y-o-y in October.

Further, the banking sector profits advanced 15.8% y-o-y to SAR4.8bn in October as compared to the decline of 5.0% y-o-y in September. Moreover, growth in mortgage continued with 39% y-o-y growth in October, driven by House and Apartment mortgages, which grew 42% y-o-y and 38% y-o-y, respectively. LDR came in at 75.6% in October Vs 75.1% in September.

POS transactions continued to maintain the uptrend, growing 33.9% y-o-y in October, driven by increase in ‘Food & Beverages’  (+60.6% y-o-y), ‘Restaurants & Hotels’ (+59.7% y-o-y), and ‘Clothing & Footwear’ (+28.9% y-o-y) segments.

The spending in the local market, especially in the retail, food & beverages, and health segments, continues to support the economy. However, SAMA foreign reserves fell 8.7% y-o-y in October (-10.6% y-o-y in September). Overall, the macro-economic conditions in the Kingdom have started normalizing, but the risk of the second-wave of pandemic still persists.

Further, oil exports dropped 38.7% y-o-y; while non-oil exports declined 9.3% y-o-y in September. Non-oil exports segment-wise: “Plastics & Rubbers” declined by 13.4% y-o-y and “Chemical Products” fell by 1.6% y-o-y, accounting for ~30.4% and ~30.1% of total non-oil exports, respectively.

Furthermore, merchandise imports witnessed a decline of 8.1% y-o-y in September. The decrease in imports was due to 26.0% y-o-y decline in “Transport Equipments” and 17.6% y-o-y drop in imports of “Machinery & Electricals”. – TradeArabia News Service