The Saudi Arabian Monetary Agency (SAMA) today issued a press release on the salient features of the Saudi economy during 1998 and 1999. The performance of the Saudi economy during the fiscal year 1998 had been affected by the sharp fall in world oil prices. Oil revenue and the value of the Kingdom's exports of oil declined sharply, increasing the budget deficit and causing a turnaround in the balance of payments position from surplus in 1997 to deficit in 1998. However, the economy showed great resilience in facing these vicissitudes. The private sector recorded further growth, thereby reflecting the diversity of its productive base and less reliance in its activity on government expenditure. It is expected that the performance of the economy in 1999 will be better than the previous year due to improvement in world oil prices, which will be positively reflected in the state budget and balance of payments.
On economic growth, the report said GDP in real terms grew by 1.6 per cent in 1998. The oil and non-oil sectors achieved positive growth rates of 2.1 and 1.2 per cent respectively during the year. The private sector registered a growth rate of 1.3 per cent while the government sector grew at 0.9 per cent. On prices, the report said the Kingdom continued to enjoy remarkable price stability in 1998. The general average cost of living index for all cities registered a decline of 0.2 per cent to 114.8 in 1998 as against a fall of 0.4 per cent in the preceding year. Latest available data show a fall of 1.4 per cent in the average cost of living index during the first nine months of 1999 as compared to a decline of 0.2 per cent in the same period of the preceding year.
The report said actual government revenue declined by 31.1 per cent to SR 141.6 billion at the end of 1998 because of the sharp fall in oil revenues. Actual government expenditure also fell but by a lower rate to SR 190. 0 billion. Consequently, the actual budget deficit went up from SR 15.8 billion or 2.9 per cent of GDP in 1997 to SR 48. 4 billion or 10.0 per cent of GDP in 1998.
The report went on to say that, on the balance of payments, estimates for 1998 indicate a deficit of SR 48.2 billion in the current account against a surplus of SR 9.6 billion in non-oil exports. This results from the steep fall in the price of oil and petrochemical products on the international markets following economic and financial crises in east Asia, Brazil and Russia. Oil exports (excluding bunker oil) declined by 37.2 per cent to SR 125.2 billion and non-oil exports by 15.4 per cent to SR 23.4 billion at the end of 1998. In contrast, the deficit in the services and transfers account narrowed by 26.3 per cent to SR 93.7 billion. This reduced the effect of the decline in the value of exports on the current account.
SAMA said the rate of the monetary expansion slowed down in 1998, with broad money (m3) registering an increase of 3.7 per cent, compared with a rise of 5.2 per cent in 1997. The main factors that contributed to the slow-down in the monetary expansion during 1998 were the net decline in government expenditure and the large deficit in the private sector's balance of payments. During the first ten months of 1999, m3 rose by 0.9 per cent, as against a relative stability at the same level during the same period of the preceding year. Regarding SAMA's policy, the report said SAMA continued to conduct its monetary policy flexibly in line with the market requirements and in close co-ordination with the fiscal policy of the government, with the objective of maintaining the stability of the domestic prices and exchange rate of Saudi Riyal. During 1998, SAMA took two important policy measures, which not only helped relieve pressures on banks' liquidity but also provided support to the exchange rate peg and enhanced the attractiveness of government bonds. It equalized the percentage of the value of government securities eligible for repurchase agreements, by reducing the percentage for treasury bills from 75 to 35 and increasing the percentage for GDBs and FRNs from 125 to 35. A new repo operating procedure was introduced according to which SAMA employs two rep rates vis; the official repo rate (ORR) and the market-related rate (MRR).
The report went on to say that the official exchange rate of the Riyal remained stable at SR 3.75 per US Dollar during 1998 but it fluctuated against other currencies within expected limits. Occasional pressures developed on the exchange rate of the Riyal but these were speculative in nature and were relieved by SAMA's safe and prudent actions. It may by noted that these pressures were not due to the basics of the Saudi economy which is characterized by several economic indicators and stable real effective exchange rate of the Riyal, it said. SAMA said commercial bank claims on the private sector rose sharply, increasing by 20.2 per cent or about SR 27.0 billion to SR 160.7 billion during 1998 as compared with the rise of 8.2 per cent or SR 10.1 billion in the preceding year. The report went on to say that banks scaled down their foreign assets and liabilities during 1998 by SR 13.6 billion and SR 2. 9 billion to reach SR 85.9 billion and SR 43.1 billion respectively at the end of December 1998. Consequently, net foreign assets declined by SR 10.6 billion to SR 42. 8 billion during the year. However, banks increased their foreign assets during the first ten months of 1999 by SR 3.2 billion to SR 89.2 billion and increased their foreign liabilities by 10. 5 billion to 53.6 billion. Thus, their net foreign assets decreased by SR 7.3 billion to 35.6 billion at the end of October 1999.
The report said commercial banks increased their capital and reserves during 1998 by SR 1.9 billion to SR 40. 2 billion. Banks also raised their capital and reserves during the first ten months of 1999 by the same amount to SR 42.1 billion. Thus banks raised the ratio of their capital and reserves to their total bank deposits and their total assets from 17.0 and 9.9 at the end of December 1998 to 17.5 and 10. 2 respectively at the end of October 1999. The report said the number of commercial banks in the Kingdom remained at 11 during 1998 of which three were Saudi-owned and eight had foreign participation: with the official merger of the Saudi-American bank and the Saudi United Bank during the second half of 1999, the number of commercial banks operating in the Kingdom went down to 10 and their branch network amounted to 1,194 at the end of October 1999. The report said the number of mutual funds managed by commercial banks rose by 16.3 per cent from 98 in 1997 to 114 in 1998. Total assets of these funds increased by 20.8 per cent from SR 20.2 billion in 1997 to about SR 24.4 billion in 1998. The number of subscribers also increased from 63.3 thousand in 1997 to 70.2 thousand in 1998.
The report said the number of ATMs increased from 1,591 in 1997 to 1,808 in 1998 and further to 1,942 at the end of September 1999. The number of ATM cards also rose from 3,052,058 in 1997 to 3,647,881 in 1998 and further to 4,507,124 at the end of September 1999. The volume of cash withdrawals through ATMs went up from SR 46.5 billion in 1997 to SR 71.7 billion in 1998 and amounted to SR 72.1 billion in the first three quarters of 1999. The number of sale terminals was 15,891 in 1998 and declined to 15,856 at the end of September 1999. The volume of payments through OS increased from SR 4.1 billion in 1997 to SR 5.0 billion in 1998 and amounted to SR 4.6 billion at the end off September 1999. Total payments through SARIE reached SR 5,246 billion in 1998 and SR 4,815 billion during the first ten months of 1999.
On the stock market, the report said the number of shares traded went down by 6.2 per cent from 314.0 million in 1997 to 294.6 million in 1998. The value of shares traded also declined by 17.1 per cent from SR 62.1 billion to SR 51.5 billion. The share price index (1985 1000) decreased to 1413.1 by the end of December 1998 as compared with 1957.8 at the same time of the preceding year, representing a decline of 27.8 percent over the year. Noting the recovery of the stock market, the report said the total number of shares traded rose by 42.4 per cent from 245 million to 349 million. The value of traded shares amounted to SR 39.2 billion as compared to SR 45.3 billion in the same period of the preceding year. The market capitalization of issued shares rose by 13.5 to 193 billion at the end of the first ten months of 1999, compared to SR 170 billion during the same period of 1998. The share price index stood at 1710.73 at the end of October 1999 as compared with 1494.20 during the corresponding period of the preceding year, rising by 14.5 per cent.
On privatization, the report said the first step taken on the recommendations of a ministerial ad-hoc committee was the setting up of the Saudi Arabian Mining Company (Ma'aden), a joint-stock company capitalized at SR 4 billion and the transfer of Saudi telephone utility to the private sector under the name of the Saudi Telecommunication Company - the first government facility to have its management transferred to the private sector under the privatization program.
The report went on to say that work continued on implementing the privatization plan and programs of public utilities in the country through re-structuring the electricity sector and regulating its administrative and financial position with the aim of merging all electricity companies. Approval was issued for establishing the National Company for Air Services (NAS), a limited liability private air company, aimed at developing the air transportation sector and supplementing the activity of the Saudi Arabian Air Lines. The General Ports Authority is now embarking on completing the first stage of the privatization program for serving the existing ports before the year 2000. The Saudi government has taken the first steps towards the gradual privatization of the postal services, measures designed to improve services and raise levels of efficiency and productivity. A joint study is underway for the transfer of the grain silos and flour mills organization to the private sector.
On industry, the report said the number of industrial units in the Kingdom rose to 3,148 at the end of 1998, with a capital of SR 232.1 billion. The units provided employment to more than 292 thousand workers. Of these 693 units produced chemical and plastic products, 560 units construction materials, ceramic and glass items, 815 units basic metal products and machines, and 504 units food and beverages.
On roads and telephone lines, the report said the total length of roads constructed by the Ministry of Communications amounted to 45.2 thousand km at the end of 1998, of which 1,124 km were constructed during 1998. Work is underway on implementing a road network of 3,900 km. The report said the number of telephone lines which were added during 1998 amounted to 297.6 thousand, raising the number of operational lines at the end of 1998 to 2.2 million. The number of public telephone lines (card, private coin, public coin and private cabins) increased by 8.1 thousand to 42.5 thousand at the end of the year, compared with 34.4 thousand in the preceding year. The number of mobile phone lines rose at the end of the year to 630,000 from 365,000 in the preceding year.
On the development of human resources and social affairs, the report said the number of students (male and female) enrolled at government and private schools of general education increased to more than 3.87 million during the academic year 1998. The number of students enrolled in institutions of higher education also rose to 296,500 during 1998. The number enrolled at colleges, institutions and vocational training increased by 6.3 to reach 37.97 thousand in 1998.
As for the growth in the health sector, the report said the number of hospitals operating in the Kingdom at the end of 1997 went up to 303, of which 180 belonged to the Ministry of Health and 84 to the private sector. The number of primary health care centers belonging to MOH rose to 1,737 while those belonging to the private sector stood at 611. The total number of beds at the Kingdom's hospitals stood at 44,200 at the end of 1997 against 42,600 in the preceding year. The number of physicians working in all health sectors in the Kingdom amounted to 30,400, of whom 19.9 per cent were Saudis. The number of firms covered by the social insurance system at the end of 1418 (March 26, 1998) rose by 21.3 per cent to 24,026 (including 1,176 public corporations), compared to 19,808 in the preceding year. The number of workers covered by the system stood at 2,538,940 at the end of 1418 against 2,512,554 at the end of the preceding year.
On population and labor force, the report said the total population of the Kingdom during 1997 rose by 2.2 per cent to 19.26 million. The total civilian work force in the Kingdom stood at 7.2 million in 1996, of which 2.5 million were Saudis. The majority of the work force was in the private sector. The construction and building sector accounted for 15. 4 per cent of the total work force, followed by the industrial sector (8.2 per cent). The productive sectors accounted for 30.4 per cent, while the community and personal services sector accounted for 32.3 per cent and the commercial sector for 15.1 percent.
Source: SPA