Strong oil prices have given a strong momentum to Saudi Arabia’s economy and this has boosted consumer spending in the Gulf kingdom to one of their highest levels, the country’s largest bank said on Tuesday.
As a result, Saudi Arabia, the largest Arab economy has a very prosperous year ahead and it is off with a strong start, National Commercial Bank (NCB) said.
It said that as an oil exporter, Saudi relies heavily on imported goods and this can lead to the assumption that Letters of Credit (LCs) are an indicator of future consumer spending.
It cited figures by the Saudi Arabian Monetary Agency (Sama), central bank, showing settled LCs reached SR84.2 billion during April, rising by a staggering 22.9 per cent since the beginning of 2012.
“Increasing confidence in the economy, particularly boosted by the elevated oil prices and production levels, has pushed businesses to import more products on the prospect that consumer spending will continue to rise,” it said in a study.
The report showed that during last month, the highest growth figures were posted by fruits and vegetables and food grains which posted 294 and 126, and 64 per cent, respectively, on an annual basis.
Additionally, building materials, motor vehicles, and machinery soared by 64, 38, and 30 per cent year/on/year.
“The gain in business activity is expected to maintain an upwards trajectory as newly opened LCs, an indicator of future settlements, gained by 21.4 per cent during April. Saudi’s large expansionary plans will pave the way for additional growth in the private sector this year,” NCB said.
“The Kingdom’s robust economy has demonstrated many opportunities for local and international investors and it will continue to do so as oil revenues are expected to remain elevated which will trickle down to the consumer and trigger further spending.”