While everything about the city may scream opulence, residents aren't just blindly spending their hard-earned money
uae1 hour ago
“Raising — that is only to be determined when conditions show that inflation is either getting out of hand or that demand for credit is exceeding the supply of credit in the economy,” Al Jasser said in an interview yesterday in his office in Riyadh. “I don’t see this now.” The Saudi Arabian Monetary Agency last year cut the repurchase rate to 2 per cent, the lowest since 2004, and the reverse repurchase rate to 0.25 per cent as the global credit crunch led to a slump in oil prices, crimping growth in the world’s largest crude exporter. The government’s $400 billion, five-year spending program and oil prices rebounding to around $75 a barrel from less than $35 in February are likely to boost the economy this year.
Riyadh-based Samba Financial Group this month said the kingdom’s economy will expand 3.7 per cent in 2010 from 0.15 per cent last year. Inflation has held around 4 per cent in the five months through November after accelerating to as high as 11 per cent in July last year.
Interest rates in Saudi Arabia, as well as in the other four Gulf Arab countries which peg their currencies to the U.S. dollar, are likely to remain unchanged until U.S. monetary policy starts to tighten, Giyas Gokkent, head of research at National Bank of Abu Dhabi, said in a phone interview today. U.S. interest rates, currently near zero, are unlikely to rise before the end of this year, he said. Saudi Arabian Finance Minister Ibrahim Al Assaf said the kingdom will continue to pump money to boost growth in 2010, even as the economy rebounds from last year’s stagnation.
“At one point there will be a curbing of spending, but in my view 2010 is a year that needs continuous stimulus to the economy,” al-Assaf said at the Global Competitiveness Forum, an investors’ conference in the Saudi capital. “The priority at the moment is the stimulus of the economy,” Gokkent said. Growth in 2009 was “not bad,” Al Jasser said. “Put aside the oil sector, the rest of the economy continued to grow very comfortably. Nonetheless, 2010 should be even better because the fiscal stimulus seems to be still there” and in the course of the year the global economic recovery should “reduce uncertainty for investors in Saudi Arabia.”
Saudi Arabia’s benchmark Tadawul All Share Index jumped 27 per cent in 2009 and gained another 2.8 per cent this year.
The Bloomberg GCC 200 Index of companies in the six Gulf Cooperation Council states increased 10 per cent last year, while the MSCI Emerging Markets Index, a gauge of 22 developing countries, surged 75 per cent. Businesses operating in Saudi Arabia may still struggle to get credit as foreign banks are reluctant to lend and local banks don’t have the resources to finance large projects, Samba, the kingdom’s second-largest bank, said in a report on Jan. 18.
Bank lending in the Arab world’s biggest economy slowed following the financial market turmoil and the default of two Saudi family conglomerates, Ahmad Hamad Algosaibi & Brothers Co. and Saad Group. Eighty lenders, including BNP Paribas SA and Citigroup Inc., are owed at least $15.7 billion, sparking a flurry of litigation.
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