JEDDAH: A strong increase in money supply and bank lending after nearly two years decline is reason to be bullish on Saudi Arabia's economy, said Riyad Capital in a note. Total deposits in the Saudi banks registered noticeable increase by 2.61 percent over that week ended Feb, 24, reaching a record of SR1,009 billion. A review of the components of deposits by type during that week indicates that "demand deposits" (DD) rose by a rate of 3.47 percent or by SR 18 billion to SR550 billion, Riyad Bank said. This increase seems to be temporary and related to end of the month salaries and probably annual special employees' payments, it noted. In contrast, time and savings deposits (T&SD) stayed at its level in the week before at SR 296 billion. Other quasi-monetary deposits rose by 4.8 percent by the end of that week, reversing the 3.2 percent decline in the week before. As a result, M1 increased by 3.46 percent over the week pushing its growth rate YTD to 3.84 percent. M2 grew by 2.34 percent over the week taking its YTD growth rate to 2.38 percent. M3, the broad definition of money supply, increased by 2.68 percent over the week and 2.61 percent YTD to reach a record of SR1,108.5 billion. Regarding interest rates, the 3-month SIBOR ended the week at 0.75 percent. The rates continued to be in the favor of riyal deposits compared to dollar deposits, the report added. Money supply grew at 8.1 in January, while monetary base dropped SR19 billion, suggesting more money was converted into lending and liquidity. "Given the improved economic picture, we are bullish for the Saudi economy in the month ahead. Risks, however, are downside, and primarily due to regional uncertainty and inflation," said the note. Riyad Bank said in its weekly Economic Briefing on March 7 that the private sector loan growth, excluding investments in securities, rose by 5.4 percent y-o-y in January to SR748.2 billion, the highest rate of growth since June 2009. Over all claims on the private sector advanced 6.3 percent y-o-y to SR 781.6 billion. With this development, the loan-to-deposit ratio increased slightly to 79.1 percent in January up from 78.8 percent in December. This shows that banks are liquid, especially with the fast growth in deposits. Net foreign assets for the banking sector alsoincreased by SR 6 billion leading the total assets for the sector to increase by 5.2 percent y-o-y in January to SR 1425.7 billion. SAMA's net foreign assets also received substantial boost of SR16.8 billion in January on the latest increases in oil prices that averaged $89.6/bbl for the month. SAMA foreign assets reached SR1,668 billion, 8.7 percent above their level a year ago. Point-of-sale transactions also mirrored the improved economic activity, rising 28.2 percent y-o-y, while new LCs increased by 1.5 percent.
