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Wed 31 Mar 2010 03:52 PM

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Saudi Feb money supply growth falls for fifth month

M3 slows down; time and savings deposits lead M3 growth slowdown.

The annual growth in Saudi Arabia's M3 money supply slowed in February for a fifth straight month, central bank data showed on Wednesday. M3, one factor potentially influencing inflation, grew 5.6 percent in February year-on-year, down from 8.3 percent in January, due mainly to a near 10 percent drop in time and savings deposits, data published by the Saudi Arabian Monetary Agency (SAMA) showed.

Demand deposits, a more liquid component of M3, rose by almost 21.6 percent in February year-on-year.

Inflation in Saudi Arabia accelerated to an annual 4.6 percent in February, its highest level since June and up from 4.1 percent in January after a rise in food costs.

SAMA said last month that housing will keep inflation rising during the first quarter but a stabilisation in food prices will keep it below the 1.5 percent recorded in the previous quarter.

SAMA data showed however that bank claims on the private sector rose by an annual 1.6 percent in February to 742.1 billion riyals, and up 0.9 percent from January, their highest month-on-month jumps since August.

The growth in bank claims on the private sector, which also includes investments in private securities, measures lender confidence in the economy's prospects.

Bank credit to the private sector, which excludes bank investment in private securities, rose by an annual 0.6 percent in February to 714.2 billion riyals up from less than 0.1 percent in January.

Saudi bank credit growth was flat throughout much of 2009 due to global turmoil and after defaults by local family firms.

An annual decline in SAMA's net foreign assets fell to about 2 percent in February from 5 percent in January. These stood at 1.553.7 trillion riyals in February up from 1.535.4 trillion riyals in January and 1.584.8 trillion riyals in February, 2009.

SAMA has said it started drawing on reserves accumulated during years of high oil prices to keep the economy going. (Reuters)

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