Time and savings deposits exceed SR406bn in KSA

Saudi Arabia’s broad money supply shrank 1.5 percent in April, exacerbated by lower oil returns and falling deposits. 

According to Saudi Economic Review by the National Commercial Bank (NCB) deposits with Saudi Arabian Monetary Agency (SAMA) dwindled by 8.4 percent Y/Y as both bank deposits and public financial institutions deposits respectively fell by 6.2 percent and 48.9 percent Y/Y. The decline which is markedly considered the largest since November 2009 was contrasted by a 3.6 percent upturn in cash in vault and a 0.9 percent uptick in currency outside banks. The monetary base thus stood at SR298.2 billion falling by 2.2 percent Y/Y. 
Spending cuts in addition to new government revenue sources highlighted in the National Transformation Program (NTP) put the Kingdom’s economy in a major shake-up treading an uncharted path away from oil, the NCB report said. 
The budget deficit which currently stands at 15 percent of GDP is taking a priority seat at the economic reform plan which poses a new challenge for the Kingdom’s monetary system as it deals with a liquidity squeeze, currency pressures, and the momentum demand for credit. So far, the government has been financing its budget deficit by the sale of local debt in addition to drawing down foreign reserves. 
Government bonds issuances surged by an annualized 163.1 percent, standing at SR140 billion by the end of April. Net foreign assets at SAMA tumbled for the 15th consecutive month in April to 15.7 percent Y/Y, a four-year low standing at SR2.14 trillion. 
The reduced revenue stream lessened the trickle down of liquidity which pressured local banks. As the government slowed payments to contractors and suppliers and started borrowing from local and soon international banks, the dry-up of liquidity affected banks largest funding base, demand deposits. By the end of April, demand deposits extended a four-month consecutive decline with yet the largest dip of 8.6 percent, standing at SR981.6 billion. 
On the other hand, the NCB report said time and savings deposits reached SR406.1 billion, upturning the most since December 2014 at 12.7 percent Y/Y. The contrasting movement in these deposit accounts indicate a rising propensity to save for businesses and individuals under the currently dismal economic prospects. The sum of currency outside banks, demand deposits and savings deposits brings M2 money supply to SR1.15 trillion, down by 2.8 percent Y/Y. Quasi monetary deposits are on the rise for fifth consecutive month on the back of increased deposits of foreign currency. In April, quasi money recorded a surge of 9.9 percent Y/Y, standing at SR210.3 billion. 
The inflationary situation in the Kingdom continues to reflect the removal of government subsidies and the diminishing base effect of low oil prices. 

In the month of April, the annualized growth in inflation recorded 4.2 percent mainly driven by housing and utilities surging by 7.5 percent. The transport category recorded the fourth month of double-digit inflation, of 12.5 percent Y/Y. The largest growth rate seen in the consumer basket during the month was for tobacco surging by 20.6 percent Y/Y. 
Despite food and beverages providing a downside pressure to the overall index, upside pressure from other categories are expected to keep inflation above 4 percent this year, the NCB report said.

Source: Arab News