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29 March 2024

High spending to keep Saudi economy strong

Published
By Staff

High pubic spending will ally with strong domestic demand and ongoing local projects to keep Saudi Arabia’s economy and offset pressure from the global slowdown, the Gulf Kingdom’s largest bank said on Tuesday.

National Commercial Bank (NCB) said letters of credit (LCs) opened in the Kingdom slipped in August but remain higher in the first eight months of 2011 than in the same period of 2010.

In a study sent to Emirates 24/7, NCB noted that the Saudi economy, the largest in the Arab region, is heavily reliant on oil exports, adding that for this reason, the Kingdom’s goods imports are a key indicator for consumer spending.

Citing government data, the report showed that LCs settled (LCs) have reached almost SR14 bn in August, a mere 0.6% increase over the same month last year.

It said this represents a huge drop from the previous month by almost SAR1.9 bn. However, it added, Saudi has proved resilient to external shocks, and increasing confidence on the domestic and international front enhanced corporate activity in the strong economy throughout 2011.

Since the beginning of the year, LCs have totaled SAR116 bn against last year’s SAR103 bn for the same period, a 12.6% increase, the report showed.

A breakdown showed the only gain in LCs during August was for livestock and food grains which picked up 169% and 39%, respectively.  Motor vehicles and building materials contracted by 34.2% and 9.1%.

However, this decline is expected as businesses slowdown imports to deplete their inventory levels, NCB said.

“We do expect LCs to moderate as the global situation has become uncertain and record a modest 10-12% increase over 2010’s level of SAR 153.3 bn.

Ongoing and planned projects coupled with consumer demand will keep the Saudi economy from faltering as government spending ensures a stable outlook for 2011 and 2012.”