| 31 Aug 2010 |
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Saudi private sector seen picking up
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Saudi Arabia's private sector, the largest in the Middle East, is picking up after more than a year of stagnation caused by the 2008 global financial crisis and ensuing slow bank credit, the Gulf Kingdom's largest bank said on Tuesday.
The private sector's imports financed through the 12 Saudi commercial banks jumped by nearly 18.5 per cent to SR 94 billion in the first half of 2010 from about SR79.3 billion in the first half of 2009, showing a turnaround from the full 2009 fall of nearly 24 per cent to SR161.7 billion, National Commercial Bank (NCB) said in a study sent to Emirates 24/7.
"We expect to see another record year of imports valued at SR360 billion for 2010. Early indications suggest that the private sector economic activities are finally picking up on rising demand for building materials, motor vehicles and investments in machinery, which together valued at SR33.1 billion and accounted for 35.2 per cent of the total banks' financing business," NCB said.
"The rise in banks' private sector's imports financing business will tend to boost banks' gross margins and profitability this year.
NCB noted that Saudi commercial banks rely on the creditworthiness of foreign representative banks in order to issue the letter of credit to the Saudi importer. "Thus, the letter of credit backs up the purchase order financing to the exporter.
In the process, local bank charges commission for the services rendered, which flows into the banks earnings proceeds."
Saudi Arabia's private sector grew by an average 5.1 per cent during the 2005-2009 development plan but the pace of growth was lower in 2009.
In its 2010-2014 plan that was approved by the cabinet last week, the world's dominant oil power targets a private sector growth of 6.1 per cent but analysts believe such a target is difficult to attain.
In its latest review of the Gulf Kingdom this week, the International Monetary Fund projected the Saudi economy to sharply rebound by around 4.3 per cent this year from nearly 0.6 per cent in 2009.It forecast real oil GDP at around 2.3 per cent, apparently expecting a mild rise in its crude output.
The IMF put non-oil growth at 3.8 per cent in 2009, around 0.5 percentage points lower than in 2008 despite what it described as global headwinds.
© Emirates 24|7 2010
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