The Saudi economy enjoyed all-round improvement during the fiscal year 1996 (1416-1417 H). The growth rate of the Gross Domestic Product (GDP) at current prices doubled from 4.3 percent in 1995 to 8.6 percent in 1996, attributable to the sharp rise in the growth rate of the oil sector, from 5.9 percent to 17.0 percent, and reflecting the increase in oil prices during 1996. The non-oil sector maintained its growth rate of 3.7 percent, as in the previous year.
Cost of living index:
The general cost of living index showed remarkable stability, the rate of increase declining from five percent in 1995 to only 0.9 percent in 1996, and showing further improvement during the first seven months of 1997, falling by 0.3 percent in contrast to a rise of 0.9 percent over the same period of 1996.
The State budget:
The budget for the current fiscal year 1997 (1417-1418 H) projected a total revenue of SR 164.0 billion (U.S. $ 43.73 billion), or 8.4 percent lower than the actual budget for 1996, which was SR 179.1 (U.S. $ 47.76 billion). Total expenditure was projected at SR 181.0 billion (U.S. $ 48.27 billion), reflecting a decline of 8.6 percent as compared with the actual expenditure of SR 198.1 billion (U.S. $ 58.83 billion) last year. The budget deficit is projected to fall to SR 17.0 billion (U.S. $ 4.53 billion), compared to SR 19.0 billion (U.S. $ 5.07 billion) in 1996.
Balance of payments:
The Kingdom's balance of payments position showed a marked improvement during the fiscal year 1996, with the current account recording a surplus for the first time since 1983. Total exports (FOB) increased by SR 24.9 billion (U.S. $ 6.64 billion) or 13.3 percent, to SR. 211.8 billion (U.S. $ 56.48 billion) in 1996, compared with a 17.4 percent rise in 1995. This increase is attributable to oil exports which rose by 15.4 percent to SR 187.6 billion (U.S. $ 50.03 billion) due mainly to higher oil prices. Total imports (FOB) declined by SR 1.1 billion (U.S. $ 0.29) or 1.1 percent to SR 95.0 billion (U.S. $ 25.33 billion) in contrast to a rise of 20.3 percent in 1995. This decrease in imports reflected an increase in domestic production as well as adjustment of inventory during the year. The trade surplus therefore increased by about SR 26.0 billion (U.S. $ 6.93 billion) or 28.6 percent to SR 116.8 billion (U.S. $ 31.15 billion). The current account balance of payments recorded a surplus of SR 0.8 billion (U.S. $ 0.21 billion) during the year, in contrast to a deficit of SR 19.9 billion (U.S. $ 5.31 billion) in 1995.
The rate of monetary expansion picked up during 1996, with broad money (M3) increasing by 7.7 percent compared with a rise of 2.9 percent in 1995. Nevertheless, this acceleration did not exert any inflationary pressure, since it was matched by a marked rise in the growth rate of the non-oil sector. During the first eight months of the current year, however, the rate of monetary expansion moderated to 3.0 percent, as compared with 3.7 percent over the corresponding period in 1996.
SAMA's monetary policy continued to be directed towards the objective of promoting and maintaining stability in the rates of the cost of living index and foreign exchange and for this purpose measures were taken to ensure that the growth of domestic liquidity was broadly in line with the availability of goods and services, and that the banking system was endowed with liquid assets adequate for the credit needs of all sectors of the economy. At the same time, a careful watch was kept on the competitive market to ensure its smooth functioning and that there were no disruptive activities affecting market signals.
Bank credit to the private sector:
Bank credit during 1996 to commercial banks in the domestic private sector increased by SR 2.4 billion (U.S. $ 0.64 billion), or 2.0 percent, to SR 123.5 billion (U.S. $ 32.93 billion) constituting 57.3 percent of total bank deposits as compared with 61.5 percent at the end of 1995. Over the eight-month period ended August 1997, however, banks' claims on the private sector increased by 8.0 percent to SR 133.4 billion (U.S. $ 35.57 billion), constituting 60.4 percent of total deposits.
Bank foreign assets:
The foreign assets of commercial banks, which had fallen by SR 0.2 billion (U.S. $ 0.5 billion) in 1995, went up in 1996 by SR 8.2 billion (U.S. $ 2.19 billion) to SR 106.2 billion (U.S. $ 28.32 billion), with a ratio to the total bank assets standing at 29.7 percent at the end of 1996 as compared with 28.7 percent at the end of 1995. Over the eight month period ended August 1997, however, banks' foreign assets declined by 15.1 percent to SR 90.1 billion (U.S. $ 24.05 billion), reflecting the banks' recourse to them to meet enlarged domestic financing requirements arising from increased economic activity and improved opportunities.
Bank capital and reserves:
Commercial banks continued to expand their equity base, with capital and reserves increasing in 1996 by SR 2.3 billion (U.S. $ 0.61 billion) to SR 37.0 billion (U.S. $ 9.87 billion). At this level, these constituted 17.2 percent of total bank deposits and 10.3 percent of total bank assets. Over the eight-month period ended August 1997, banks' capital and reserves increased further by SR 1.9 billion (U.S. $ 0.51 billion) to SR 38.9 billion (U.S. $ 10.37 billion), constituting 17.6 percent of total bank deposits and 10.4 percent of their total assets/liabilities.
Branches and technology:
The number of bank branches stood at 1,208 at the end of December 1996. Of these, 507 were in the northern and central provinces, 473 in the western and southern provinces, and 228 in the Eastern Province. By the end of the third quarter of 1997, the total number stood at 1,201. In collaboration with SAMA, banks continued to make progress in the use of advanced technology, with the number of Automated Teller Machines (ATMs) in the Kingdom standing at 1,359 at the end of 1996, showing a rise of 235 over the year. This number increased by 120 to 1,479 by the end of the first half of 1997.
In May 1997 SAMA launched an electronic funds transfer system called the Saudi Arabian Riyal Interbank Express (SARIE), a state-of-the-art system designed to place the Kingdom on a par with developed countries in the field of payments and settlements between commercial banks in the service of their public and private sector customers through a unified electronic network characterized by precision, security and outstanding speed. The system enables banks to make and receive payments directly from their accounts with SAMA on a real-time basis. It also provides a fully-automated link between all the clearing systems of the Kingdom, including the Saudi payments network (SPAN) and the electronic share information system (ESIS). Monthly transfers through SARIE have averaged SR 300 billion (U.S. $ 80 billion) in over 33,000 transactions.
The Stock Market:
Activity on the Saudi stock market witnessed a marked improvement in 1996, with the total value of shares traded increasing by 9.5 percent to SR 25.4 billion (U.S. $ 6.78 billion) while the number of shares traded rose by 18.2 percent to 137.8 million. The general share price index increased by 11.9 percent to 153.1. During the first nine months of the current fiscal year of 1997, the stock market has seen strong growth, with the total value of shares increasing to SR 42.8 billion (U.S. $ 11.41 billion), an increase of 186 percent as compared to the same period of 1996, while the total number of shares traded went up by 175.2 percent to 231.8 million. The general share price index rose by 23.8 percent over the same period. To open up the stock market to foreign investors without undue risk of instability, SAMA made a beginning early in 1997 by allowing one Saudi bank to float a closed-end equity fund, in which foreigners could also participate, and which may be used for investment in the stock market.