The Saudi economy remains robust despite the global economic slowdown and the drop in oil prices, and there are huge opportunities for growth in the Kingdom's financial sector, according to a leading banker. Dr. Jarmo Kotilaine, chief economist of NCB Capital, said the Kingdom's banking assets have more than doubled in the last five years, reaching a total worth of SR1.3 billion ($347 million) in 2008, placing Saudi Arabia second only to the UAE in the GCC region, with the robust growth largely due to personal finance mortgage lending and corporate lending. Kotilaine, speaking at the third annual Investment Horizons International Exhibition and Forum held here late last month, said the Kingdom's insurance market's gross written premiums account for 29 percent of the GCC total, and in the GCC asset management industry Saudi-focused funds account for SR56.25 billion ($15 billion) of the total SR150 billion ($40 billion) assets under management in the GCC. At the event themed “The Challenges and Opportunities facing GCC countries, Kotilaine said Saudi banking sector penetration is low even by regional standards, with only 57 bank branches per million of the population, which is significantly lower than in the UAE and Kuwait where there are 181 and 92 branches per million population respectively. He said the Kingdom's loan-to-GDP ratio of 42.8 percent in 2008 is among the lowest in the GCC region, while the deposit-to-GDP ratio of 46.8 percent in 2008 is also well below the GCC average of 60.4 percent. Commenting on the Saudi financial sector remaining an emerging sector, Dr. Kotilaine pointed out that, although in absolute terms the Kingdom's financial sector is the second largest in the GCC, as a proportion of GDP it is still smaller than some of its regional peers. With 8 percent contribution to the Kingdom's GDP (2008), the size of the Saudi financial market lags behind other key emerging markets with banking assets as a percentage of GDP standing at 75 percent, which is still significantly lower that the US average of 97 percent, the EU average of 112 percent and the GCC average (excluding Saudi Arabia) of 104 percent. Referring to the global economic crisis, Kotilaine explained that the troubles of the Saudi financial sector are cyclical whereas in the West they are cyclical and structural. While a cyclical correction can be painful, a structural crisis is a problem of a different order of magnitude that can shake a system to the core, he said. He said major financial sector reforms and initiatives by Saudi Arabian Monetary Agency (SAMA and the Capital Markets Authority (CMA) have considerably aided growth in the sector in recent years. He also praised the authorities' strong supervision of the financial sector and the pre-emptive measures taken to help the sector deal with the downturn. __
