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Sun 29 May 2011 04:22 PM

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Spending spree takes hold in Saudi Arabia

King’s largesse seeps through to consumers, but private sector credit growth muted

Spending spree takes hold in Saudi Arabia
Saudi shopping, Saudi Arabia shopper
Spending spree takes hold in Saudi Arabia
Saudi King Abdullah (AFP/Getty Images)
Spending spree takes hold in Saudi Arabia
Saudi shopping, Saudi Arabia shopper

Saudi consumers have begun spending their considerable bonuses received as part of King Abdullah’s recent $130bn social benefits packages, according to recent data.

Data from the Saudi Arabian Monetary Agency (SAMA) showed that the value of point-of-sale transaction in April increased by 58 percent year-on-year.

A note from Banque Saudi Fransi (BSF) claimed that the upswing in consumer confidence – aided also by a 31.8 percent year-on-year increase in the number of point-of-sale transactions – showed that consumers were willing to make big-ticket purchases.

BSF said that the government had paid around $14bn in bonuses to civil servants (two months’ wages), while many private sector firms and banks had taken similar steps.

However, increased spending levels have thus far not led to the expected rise in inflation, which rose marginally from 4.7 percent in March to 4.8 percent in April.

BSF said that the steady levels were due to “a decent decline in the pace of rental inflation and some base effects”, while retail categories remained stable.

“This could indicate many retailers are loath to increase prices as they sell excess inventory ahead of restocking during the summer, including the June wedding season,” BSF said.

Despite the increased liquidity in the banking system due to higher levels of deposits, private-sector lending growth edged down from 6.5 percent in March to 6.4 percent in April.

“With all of the new deposits, banks are well-capitalised to be able to extend new loans, although they continue to apply more stringent rules for loan extensions,” the BSF note said.

“Private-sector businesses meanwhile are not expanding their businesses as much as they had before the financial crisis.”

Saudi Arabia posted yet another record in terms of its net foreign assets, which rose by 13.2 percent year-on-year to $468bn, helped by the $110 average price of a barrel of oil in April.