The growth of the monetary supply provides an environment for a...

The growth of the monetary supply provides an environment for a potential consolidation into the Saudi banking sector

Member of the Shura Council for “Asharq Al-Awsat”: Oil prices, high domestic demand and project movement are stimulating indicators

Grandmother: Saeed Al-Abyad

A specialist in the Saudi Shura Council expected that the mass of monetary indicators in the Saudi economy would grow to more than 12 percent during the coming period, with the growth of the volume of lending in parallel with the economic openness experienced by the Saudi market, expecting that this growth will trigger the announcement of new potential alliances in the banking sector During the next period.
According to special statements, the member of the Shura Council, in an interview with Al-Sharq Al-Awsat, attributed the expected growth of the monetary supply in exchange for what is being strengthened by current ongoing factors, foremost of which is the rise in oil prices in global markets, as well as the gradual increase in demand for purchase with the end of the Corona pandemic, in addition to the size of projects and diversity. The economy in which Saudi Arabia is living, which enabled it to overcome the pandemic, with direct support from the government and the private sector.
These expectations come after the Governor of the Saudi Arabian Monetary Agency, Dr. Ahmed Al-Khulaifi, announced in a press conference that followed the ministerial meeting of finance ministers and central bank governors in the middle of the week, that the monetary mass indicators growing by 9 percent, and lending in its forms (real estate, commercial and consumer) rose 13 percent, what It gives clear signs of recovery in the Saudi economy despite the Corona pandemic.
The strength of the Saudi economy is strengthened by what the global Fitch agency announced earlier that Saudi Arabia possesses one of the largest sovereign assets, which makes it deserving of a stable outlook, in addition to an earlier announcement from Moody’s that placed Saudi Arabia at an A1 rating with a stable outlook.
Liquidity in the Saudi economy reached its highest level in mid-August of 2.04 trillion riyals ($ 544 billion), while the money supply rose, according to the Saudi Arabian Monetary Agency in its latest statistics, to 0.93 percent. Increasing the money supply and lowering interest rates contribute to an “expansionary monetary policy”, in boosting aggregate demand, which supports gross domestic product and employment. This policy is a pivotal factor in reducing unemployment and the economic downturn that hit economic capitals around the world.
Regarding the expected merger of Saudi banks, Saleh Al-Khalili, Chairman of the Financial Committee of the Saudi Shura Council, said that “mergers have not yet crystallized their features and there may be an acquisition deal,” noting that they will produce a large entity that will result in a reduction in expenditures, noting that the mergers enhance the ability of Banking entities that possess a large stock of reserves that enable them to have economic and financial stability.
Al-Khalili added, in an interview with Asharq Al-Awsat, that all indicators and data issued by the concerned authorities confirm the strength and durability of the Saudi economy, which was able to overcome the Corona pandemic and mitigate the negative effects by taking a set of measures to support the private sector, which contributed to living with this crisis and dealing with it. According to the data, to gradually emerge from a crisis that afflicted many countries of the world.
Al-Khelwi added that expectations are for the growth and rise of the monetary mass to exceed 9%, as well as lending will exceed 13% in all its forms, referring to several factors, including the enormity of the Saudi economy, and the rise in oil prices recorded in global markets, which returned to Almost normal and this rise is expected to continue in global markets.
“This rise will reach its peak with the end of the Corona pandemic, and it will also strengthen the role of oil-producing countries to revive their economy,” he added.
The head of the Financial Committee in the Shura Council did not disclose the size of this increase in the next stage, but he stressed that the economic indicators and what is happening in the local market in terms of bank alliances and the strength of monetary reserves, enhance this growth to more than excellent levels, especially since there are a number of The vital and major projects that are being implemented.
Regarding banking alliances, Al-Khulaiwi expected the existence of new banking alliances that support the local economy, which will contribute to reducing the gap and differences between large and small banks, explaining that banking alliances are important and have large economic dimensions.
He said, “Alliances do not come at the expense of other banks … There is no harm in having alliances to establish large banking banks that will be at the regional level and play a pivotal role in the next stage … which is encouraged by the concerned authorities to be a tributary of the Saudi economy.”
The past week witnessed the announcement of a Saudi banking merger that would generate the largest banks in the Middle East and North Africa through a merger between the Saudi National Commercial Bank and the Samba Financial Group, as the merger is expected to lead to the establishment of a banking institution that has assets worth 837 billion riyals (223 billion dollars). In achieving annual cost savings of 800 million riyals ($ 213 million).

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The Saudi economy