Aug 06 2010 |
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Outlook for 2010-11: Monetary policy
The currency's peg to the US dollar, which is likely to be maintained throughout the forecast period, means that the main policy rate of the Saudi Arabian Monetary Agency ( SAMA , the central bank) must roughly track movements in US interest rates, although this can sometimes lead to economic distortions when the two countries' growth paths are misaligned. The reverse repo (repurchase), or deposit, rate was cut to 0.25% in June 2009, following another cut by 25 basis points in April. The Federal Reserve (the US central bank) is expected to maintain rates at a low level throughout 2010 and is likely to begin significant monetary tightening only in the second half of 2011. SAMA will follow these broad trends but may begin to tighten monetary policy ahead of the US owing to concerns about rising inflation.
Credit to the private sector stagnated for much of 2009 owing to banks' concerns about corporate risk and as companies adjusted to new lending requirements. However, it picked up at the beginning of 2010 and is likely to continue expanding during the year. The bulk of current lending may be going to larger companies, and the government may privately lean on banks to increase their lending to smaller businesses in the domestic private sector.
| International assumptions summary | ||||
| (% unless otherwise indicated) | ||||
| 2008 | 2009 | 2010 | 2011 | |
| Real GDP growth | ||||
| World | 2.8 | -0.7 | 4.2 | 3.6 |
| OECD | 0.6 | -3.3 | 2.5 | 1.7 |
| EU27 | 0.9 | -4.2 | 0.8 | 1.1 |
| Exchange rates | ||||
| ¥:US$ | 103.4 | 93.7 | 92.6 | 93.0 |
| US$:€ | 1.5 | 1.4 | 1.3 | 1.2 |
| SDR:US$ | 0.6 | 0.6 | 0.7 | 0.7 |
| Financial indicators | ||||
| ¥ 3-month money market rate | 0.9 | 0.4 | 0.2 | 0.3 |
| US$ 3-month commercial paper rate | 2.2 | 0.3 | 0.2 | 0.4 |
| Commodity prices | ||||
| Oil (Brent; US$/b) | 97.7 | 61.9 | 80.0 | 78.5 |
| Gold (US$/troy oz) | 871.8 | 973.0 | 1,187.3 | 1,242.5 |
| Food, feedstuffs & beverages (% change in US$terms) | 28.3 | -20.4 | -3.4 | 0.0 |
| Industrial raw materials (% change in US$terms) | -5.1 | -25.6 | 33.7 | 5.1 |
| Note. Regional GDP growth rates weightedusing purchasing power parity exchange rates. | ||||
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