Saudi Arabian Monetary Agency (SAMA) expects the Kingdom's real gross domestic product (GDP) at current prices to rise 5.1 percent in 2011, it said in its annual report released on Monday.SAMA Gov. Mohammad Al-Jasser handed over the 47th annual report to Custodian of the Two Holy Mosques King Abdullah in the presence of the Minister of Finance Ibrahim Al-Assaf, SAMA Deputy Gov. Abdulrahman bin Abdullah Al-Homaidi and senior SAMA officials at Al-Yamamah palace in Riyadh on Monday.Crown Prince Naif, deputy premier and minister of Interior, also received the latest SAMA report.
The SAMA report said the Kingdom's GDP at current prices rose 18.8 percent to SR1.7 trillion in 2010 while GDP at constant prices (base year 1999) grew by 4.1 percent to SR871.6 billion.The actual budget recorded a surplus of SR87.7 billion, or 5.4 percent of GDP in 2010 against a deficit of SR86.6 billion, or 6.2 percent of GDP in the previous year. The ratio of public debt to GDP declined from 16.1 percent in 2009 to 9.9 percent in 2010, the SAMA report said.The current account of the balance of payments recoded a surplus for the 12th year consecutively amounting to SR250.3 billion, or 14.9 percent of GDP in 2010. Broad money (M3) increased by 5.0 percent to SR1.08 trillion.Driven by the rise in oil prices and the policies taken by the Kingdom to stimulate the nonoil sector, GDP at current prices (including import duties) recorded a rise of 18.8 percent to SR1.68 trillion in 2010.The oil sector GDP rose by 31.6 percent to SR837.6 billion.
The nonoil sector GDP grew by 7.5 percent to SR792.8 billion. The nonoil private sector GDP went up by 6.3 percent to SR482.6 billion, while that of the government sector grew by 9.3 percent to SR310.1 billion.Data on GDP at constant prices (including import duties) show that it grew by 4.1 percent to SR871.6 billion in 2010 compared to SR836.9 billion in 2009.Jarmo T. Kotilaine, chief economist at the National Commercial Bank, said: "This GDP projection is a strong number even if it falls short of the consensus forecast. One of the challenges in terms of predicting the headline real growth figure this year has been the unprecedented pipeline of government project, partly as a result of the record budget, partly due to the commitments made in the royal decrees in the spring. Their GDP contribution is obviously determined by their timing and any delays this years will hopefully mean a stronger underpinning for growth next year."He said even though the growth marks a clear acceleration on last year and counts as one of the best outcomes for major economies internationally, it is inevitably to a degree reflective of the uncertain global economic environment.According to the SAMA report, broad money (M3) increased by 5.0 percent to its highest level of about SR1.08 trillion in 2010 compared to an increase of 10.7 percent to SR1.03 trillion in the preceding year. Currency outside banks rose by 8.1 percent, and demand deposits by 22.4 percent. However, time and savings deposits dropped by 7.8 percent compared to 2009. Other quasi-money deposits went down by 15.0 percent.Also Monday, banking sources said Saudi Arabia is in talks with banks about issuing a riyal-denominated sukuk.
Banking sources said on Monday that high-level discussions are currently ongoing between the SAMA and a number of local and international banks with operations in the Kingdom regarding the details.The issue is expected as early as the first quarter of next year.Turki A. Al-Hugail, economic analyst, told Arab News: "The Saudi minister of finance stated in Q3, 2010 that the government will create debts once the debt to GDP is below 10 percent. In 2010, debt to GDP reached 10.2 percent (SR176 billion) from 82 percent in 2003 (SR660 billion). I believe the figure will be reduced to 7.4 percent to reach SR145 billion."
He said SAMA's foreign assets at record high hovering around SR2 trillion with decent returns. The government would like to diversify its investments through its semi-government agencies. "The main purpose of issuing sukuk is to finance the ongoing and upcoming operations to develop a well established infrastructure. Direct borrowing from a bank as more restrictive and expensive than selling debt on the open market through a sukuk issue," Al-Hugail said."Our economy has warded off the perils of credit crisis that have engulfed economies of many industrialized countries," the SAMA report said.
The Kingdom also achieved a budget surplus of 5.2 percent of the GDP. The Kingdom also achieved budget surplus of SR250.3 billion for the 12th year.The inflation rate rose only slightly from 5.1 percent in 2009 to 5.3 percent in 2010 and then fell to 5.2 in October 2011, the report showed.
The report attributed the inflation to rise in the price of food and rentals in the recent years."Growth has relied heavily on the oil sector and on government spending. Even though we have seen considerable positive momentum in bank lending to the private sector, growth in this area remains far behind the pre-crisis level, especially in real terms. Some other elements of the financial sector, have seen even less progress," Kotilaine said."Nonetheless, it is obvious that Saudi Arabia can look forward to 2012 from a position of considerable macroeconomic strength and resilience. Even as global uncertainties abound, Saudi Arabia is well positioned to weather potential challenges," he added.
Commenting on the sukuk report, Kotilaine, said this issuance would in many ways be a momentous development for the national and regional sukuk markets and would give them a very welcome shot in the arm at a time when Malaysia still decisively dominates the global sukuk market, routinely accounting for up to two-thirds of the total. Interestingly, the Malaysian success story builds very heavily on sovereign and quasi-sovereign issuance."In the current global environment, its macroeconomic stability and benign growth prospects should make Saudi Arabia a very attractive issuer by international standards, whether the sukuk would be sold internationally or not. It would create important additional, high-grade investment opportunities for Saudi banks and other institutions. Such assets tend to constitute the backbone of the portfolios of institutional issuers globally," Kotilaine said.