Saudi Arabia: Economic growth slows; liquidity tightens as ... - NBK.com
Chartbook 31 May 2016
Macroeconomy
Saudi Arabia: Economic growth slows; liquidity tightens as deposits contract
Real GDP growth slowed to 3.4% in 2015 as non-oil sector activity cooled on lower government spending.
The recently launched Vision 2030 aims to restructure the Saudi economy and reduce its dependence on oil.
Inflation accelerated to 4.2% y/y in April following hikes to fuel and utility prices.
The fiscal deficit widened to -15.9% of GDP in 2015 on lower oil revenues and despite a 13% cut in expenditures; the deficit is being financed by a combination of reserve drawdowns and debt issuance.
Net foreign assets have consequently fallen to $620 billion in April—the 15th consecutive month of decline.
Amid slowing deposit growth and bond issuance, tighter liquidity has moved interbank rates above 2% again.
The riyal is under speculative pressure in the forward currency market.
Citing deterioration in the kingdom’s credit profile, Moody’s downgraded Saudi’s credit rating to Aa3 from A1. Chart 1: Real GDP
Chart 2: Crude oil production
(% y/y)
(million barrels per day, mb/d)
14
14 Oil
Non-oil
Total
12
12
10
10
8
8
10.6
10.6
10.4
10.4
10.2
10.2
10.0
10.0
9.8
9.8
9.6
9.6
9.4
9.4
6
6
4
4
9.2
9.2
2
9.0
9.0
8.8
8.8
8.6
8.6
2 0
0
-2
-2 2010
2011
2012
2013
2014
2015
8.4 Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
8.4 Apr-16
Growth slowed to 3.4% in 2015 due to moderating non-oil sector activity; oil sector output was higher, however.
Oil output continues to top 10.2 mb/d as the kingdom looks to preserve market share amid low oil prices.
Source: General Authority for Statistics
Source: Joint Organizations Data Initiative (JODI)
10 9
Chart 3: Crude exports and consumption
Chart 4: Oil prices
(mb/d)
(dollars per barrel, $/bbl)
Exports
Refinery throughputs
Direct burn
10 9
60
60
50
50
5
40
40
4
30
30
20
20
10
10
7
7
6
6
5 4 3
3
2
2
1
1
Sep-14
Jun-15
Arab Light
70
8
Dec-13
80 Brent
70
8
0 Mar-13
80
0 Mar-16
0 May-15
0 Aug-15
Nov-15
Feb-16
May-16
Exports are up but with two new refineries fully on line, so are refinery runs, which now account for 25% of crude output.
Oil supply outages and firmer oil demand have pushed prices up by 77% to almost $50/bbl since January’s 13-year low.
Source: JODI
Source: Thomson Reuters Datastream
NBK Economic Research, T: (965) 2259 5500, F: (965) 2224 6973, © 2016 NBK
www.nbk.com
Chart 5: ATM and point of sale (POS) transactions (value, % y/y)
50 POS
Chart 6: Purchasing Managers’ Index (PMI) 50
ATM
40
40
30
30
20
20
10
10
0
0
(index)
66
66
64
64
62
62
60
60
58
58
56
56
54
54
above 50 indicates expansion
52
52
50
-10
-10
-20 Mar-12
Mar-13
Mar-14
Mar-15
-20 Mar-16
50
48
48
below 50 indicates contraction
46 Aug-09
Dec-10
Apr-12
Aug-13
Dec-14
46 Apr-16
ATM/POS activity has been moderating since late 2014, confirming the slowdown in non-oil sector growth.
April’s PMI of 54.2 points to a private sector expanding slightly better than the slowest rate in the survey’s history.
Source: SAMA
Source: Markit/Emirates NBD
Chart 7: Saudi unemployed
Chart 8: Saudization (Saudis employed in the private sector)
0.7
14
Saudi unemployed (Million, LHS) Saudi unemployed (%, RHS)
0.6
12
0.5
10
2.4
24
2.2
22
2.0
20
1.8 1.6
0.4
8
0.3
6
0.2
4
0.1
2
0.0
0
18
Million (LHS)
16
Saudization ratio (%, RHS)
1.4
14
1.2
12
1.0
10
0.8
8
0.6
6
0.4
4
0.2
2
0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015
0 2009
2010
2011
2012
2013
2014
2015
The unemployment rate fell slightly to 11.5% in 2015, mainly as a result of a small contraction in the Saudi labor force.
With the Saudization ratio falling back to 20.7% in 2015, the Nitaqat program has yet to deliver the expected results.
Source: Ministry of Labor, SAMA
Source: Ministry of Labor, SAMA
Chart 9: Inflation
Chart 10: Fiscal balance
(% y/y) 14
12 10
Headline inflation Food & beverages Housing, water, electricity & gas Transport
14
400
20
12
300
15
10
200
10
100
5
0
0
8
8
6
6
4
4
2
2
0
0
-2
-2
-300
-4 Apr-16
-400
-4 Apr-14
Oct-14
Apr-15
Oct-15
-100
-5
-200
-10 Expenditures ($ bn, LHS) Revenues ($ bn, LHS) Fiscal balance (% of GDP, RHS)
2010
2011
2012
2013
-15 -20 2014
2015
Inflation ticked up in January to 4.3% y/y, where it has remained, following the fuel and utility price hikes.
The deficit widened to -15.9% of GDP in 2015 as revenues dropped by 42% and despite a 13% cut in expenditures.
Source: SAMA
Source: Ministry of Finance
NBK Economic Research, T: (965) 2259 5500, F: (965) 2224 6973, © 2016 NBK
www.nbk.com
Chart 11: Vision 2030 – key measures/objectives
Chart 12: Reserves/deposits of the central government ($ billion)
- Reduce subsidies on fuel, electricity and water
500
- Sell
Macroeconomy
Saudi Arabia: Economic growth slows; liquidity tightens as deposits contract
Real GDP growth slowed to 3.4% in 2015 as non-oil sector activity cooled on lower government spending.
The recently launched Vision 2030 aims to restructure the Saudi economy and reduce its dependence on oil.
Inflation accelerated to 4.2% y/y in April following hikes to fuel and utility prices.
The fiscal deficit widened to -15.9% of GDP in 2015 on lower oil revenues and despite a 13% cut in expenditures; the deficit is being financed by a combination of reserve drawdowns and debt issuance.
Net foreign assets have consequently fallen to $620 billion in April—the 15th consecutive month of decline.
Amid slowing deposit growth and bond issuance, tighter liquidity has moved interbank rates above 2% again.
The riyal is under speculative pressure in the forward currency market.
Citing deterioration in the kingdom’s credit profile, Moody’s downgraded Saudi’s credit rating to Aa3 from A1. Chart 1: Real GDP
Chart 2: Crude oil production
(% y/y)
(million barrels per day, mb/d)
14
14 Oil
Non-oil
Total
12
12
10
10
8
8
10.6
10.6
10.4
10.4
10.2
10.2
10.0
10.0
9.8
9.8
9.6
9.6
9.4
9.4
6
6
4
4
9.2
9.2
2
9.0
9.0
8.8
8.8
8.6
8.6
2 0
0
-2
-2 2010
2011
2012
2013
2014
2015
8.4 Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
8.4 Apr-16
Growth slowed to 3.4% in 2015 due to moderating non-oil sector activity; oil sector output was higher, however.
Oil output continues to top 10.2 mb/d as the kingdom looks to preserve market share amid low oil prices.
Source: General Authority for Statistics
Source: Joint Organizations Data Initiative (JODI)
10 9
Chart 3: Crude exports and consumption
Chart 4: Oil prices
(mb/d)
(dollars per barrel, $/bbl)
Exports
Refinery throughputs
Direct burn
10 9
60
60
50
50
5
40
40
4
30
30
20
20
10
10
7
7
6
6
5 4 3
3
2
2
1
1
Sep-14
Jun-15
Arab Light
70
8
Dec-13
80 Brent
70
8
0 Mar-13
80
0 Mar-16
0 May-15
0 Aug-15
Nov-15
Feb-16
May-16
Exports are up but with two new refineries fully on line, so are refinery runs, which now account for 25% of crude output.
Oil supply outages and firmer oil demand have pushed prices up by 77% to almost $50/bbl since January’s 13-year low.
Source: JODI
Source: Thomson Reuters Datastream
NBK Economic Research, T: (965) 2259 5500, F: (965) 2224 6973, © 2016 NBK
www.nbk.com
Chart 5: ATM and point of sale (POS) transactions (value, % y/y)
50 POS
Chart 6: Purchasing Managers’ Index (PMI) 50
ATM
40
40
30
30
20
20
10
10
0
0
(index)
66
66
64
64
62
62
60
60
58
58
56
56
54
54
above 50 indicates expansion
52
52
50
-10
-10
-20 Mar-12
Mar-13
Mar-14
Mar-15
-20 Mar-16
50
48
48
below 50 indicates contraction
46 Aug-09
Dec-10
Apr-12
Aug-13
Dec-14
46 Apr-16
ATM/POS activity has been moderating since late 2014, confirming the slowdown in non-oil sector growth.
April’s PMI of 54.2 points to a private sector expanding slightly better than the slowest rate in the survey’s history.
Source: SAMA
Source: Markit/Emirates NBD
Chart 7: Saudi unemployed
Chart 8: Saudization (Saudis employed in the private sector)
0.7
14
Saudi unemployed (Million, LHS) Saudi unemployed (%, RHS)
0.6
12
0.5
10
2.4
24
2.2
22
2.0
20
1.8 1.6
0.4
8
0.3
6
0.2
4
0.1
2
0.0
0
18
Million (LHS)
16
Saudization ratio (%, RHS)
1.4
14
1.2
12
1.0
10
0.8
8
0.6
6
0.4
4
0.2
2
0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015
0 2009
2010
2011
2012
2013
2014
2015
The unemployment rate fell slightly to 11.5% in 2015, mainly as a result of a small contraction in the Saudi labor force.
With the Saudization ratio falling back to 20.7% in 2015, the Nitaqat program has yet to deliver the expected results.
Source: Ministry of Labor, SAMA
Source: Ministry of Labor, SAMA
Chart 9: Inflation
Chart 10: Fiscal balance
(% y/y) 14
12 10
Headline inflation Food & beverages Housing, water, electricity & gas Transport
14
400
20
12
300
15
10
200
10
100
5
0
0
8
8
6
6
4
4
2
2
0
0
-2
-2
-300
-4 Apr-16
-400
-4 Apr-14
Oct-14
Apr-15
Oct-15
-100
-5
-200
-10 Expenditures ($ bn, LHS) Revenues ($ bn, LHS) Fiscal balance (% of GDP, RHS)
2010
2011
2012
2013
-15 -20 2014
2015
Inflation ticked up in January to 4.3% y/y, where it has remained, following the fuel and utility price hikes.
The deficit widened to -15.9% of GDP in 2015 as revenues dropped by 42% and despite a 13% cut in expenditures.
Source: SAMA
Source: Ministry of Finance
NBK Economic Research, T: (965) 2259 5500, F: (965) 2224 6973, © 2016 NBK
www.nbk.com
Chart 11: Vision 2030 – key measures/objectives
Chart 12: Reserves/deposits of the central government ($ billion)
- Reduce subsidies on fuel, electricity and water
500
- Sell
