JEDDAH: Saudi Arabian Monetary Agency (SAMA) – Saudi Arabia's central bank – expects to see moderate inflationary pressures in the Kingdom in the second quarter of this year, it said in a quarterly inflation report Wednesday. Inflation in the Kingdom has eased since touching an 18-month high of 6.1 percent in August 2010 as a rise in food costs subsides. "Available data ... show possible continued domestic inflationary pressures, at moderate rates, during the second quarter of 2011," the central bank said in the report published on its website www.sama.gov.sa. Consumer price growth in the largest Arab economy reached 4.8 percent year-on-year in April, still fuelled by high food prices. The central bank also said construction of new housing units following a series of spending package launched by King Abdullah, Custodian of the Two Holy Mosques, should contribute to decrease the inflation rate in the medium and long term. The Kingdom has pledged to spend an estimated $130 billion, or around 30 percent of its annual economic output, on new houses, creating jobs, unemployment benefit and other measures. SAMA Governor Muhammad Al-Jasser said in March the King's initiatives were not likely to exacerbate inflation, although analysts challenged this view, saying the package would fuel household consumption. Analysts see price pressures building up in the next months mostly due to the traditional pressures on food costs during the holy month of Ramadan, which starts in August, when families enjoy larger and more elaborate meals after daylight fasting. A Reuters poll in March showed analysts expected average Saudi inflation of 5.6 percent this year, up from 5.3 percent last year. Meanwhile, during the first quarter of this year, GCC corporates posted a good set of numbers with earnings growth of 19 percent when compared to 1Q10. Total earnings, which came in at $13.8 billion, were more than double the profits posted during the previous quarter (4Q10). The highest growth was in Kuwait, which saw a sharp rebound in earnings, coming in at $2.1 billion, a near doubling from 1Q10. Saudi earnings held strong, with a 23 percent growth while UAE was flat. Corporate earnings were driven by strong performances from commodity companies and banks. Earnings of Saudi Arabian companies totaled $5.8 billion, an increase of 23 percent YoY and 9 percent QoQ. SABIC, which reported $2 billion in 1Q profits, led the growth which was driven by higher volumes and prices. Al Rajhi Bank reported flat numbers with net income of $453 million. Saudi Telecom's net profit declined 11 percent YoY to $419 million. The drop in net profit is mainly on account of higher other non-operating expenses in this quarter. Meanwhile, Kuwait recorded strong earnings growth this quarter on the back of sluggish last quarter performance. Corporate earnings grew 98 percent YoY, supported by recovery in the financials, commodities and telecom. Telecom sector growth was driven by one time gain of $962 million at Wataniya in addition to support from Zain's 42 percent YoY net income growth. However, Zain's bottom line was 19 percent lower than 4Q10 number due to foreign exchange losses. Although Kuwait's banking sector profits were almost flat over the quarter, YOY growth was at a healthy 41 percent. National Bank of Kuwait registered net income growth of 11 percent YoY to $291 million. The region's continued dominance as a petrochemical hub, global recovery, low cost advantages and spikes in commodity prices augured well for companies across the region. Aggregate net profits from the commodity sector were $3.3 billion (+51 percent YoY, +28 percent QoQ). Among other sectors, banking continued to deliver the highest profits, at $5.2 billion.
