By Damian Reilly
SAMA governor says economy has solid fundamentals, eyes further recovery.
Despite solid fundamentals, Saudi Arabia’s economy is not insulated from the global financial crisis and the country’s policy makers keenly appreciate the importance of worldwide recovery, Saudi Arabian Monetary Agency governor Dr Muhammed Al Jasser said on Sunday.
He added that many developing countries’ economies were better positioned to cope with the fallout from the crisis than those with advanced economies.
Speaking at the Global Competitiveness Forum in Riyadh, he said: “Our banking system was not in need of official financial support (in 2009), and in the years before the crisis we repaid most of our government debt, so at the macro-economic level our public finances are reasonably sound despite the SR45bn budget deficit in 2009...
"However, Saudi Arabia is not immune to what happens globally. Given the interconnectedness of the economies and markets the impact is inevitable but the degree of shock varies across the countries.
"As a resource based economy it is important to us to have a sustained global recovery.”
Agreeing with forecasts that global economic recovery would be sluggish in 2010, Al Jasser said emerging from the crisis would present the world’s Central Banks with three problems.
“The first challenge is economic dispersion – the transfer of economic power away from the advanced economies has been accelerated by the events of the last few years. With responsible fiscal policies and low debt to GDP ratios, the developing economies are structurally stronger.
"The challenge for the advanced economies is to increase their savings and gradually reduce budget deficits to avert a further worsening of their fiscal position.
“The second challenge is policy dispersion in monetary and regulatory policy. There was a synchronised easing of monetary policy during the crisis, but there will be de-sychronised exit strategies which will be critical in shaping the course of the recovery.”
The third challenge related to reassessing the future performance of various asset classes once fiscal stimulus packages ended.
“We have witnessed a powerful effect from macro-economic policies but the future remains deeply uncertain,” Al Jasser said.