SAMA chief sees inflation falling to 4.3% in 2014



REUTERS

Published — Monday 4 March 2013

Last update 6 March 2013 4:30 am

| نسخة PDF Print News | A A

RIYADH: Inflation in Saudi Arabia is running at acceptable levels, the country’s central bank chief said on Sunday, playing down concerns that the economy could be overheating.
Fahad Al-Mubarak, governor of the Saudi Arabian Monetary Agency (SAMA), told a news conference inflation was expected to ease next year having edged up to a seven-month high of 4.2 percent year-on-year in January.
Al-Mubarak, a former chairman and managing director of Morgan Stanley Saudi Arabia, has not met the press inside the Kingdom since being appointed in December 2011, though he did speak in public in Abu Dhabi last year.
“Current inflation is tolerable and if you compare to other emerging markets we are well below,” he said. “The expectation for this year and next year — and I will cite the IMF (International Monetary Fund) — is expected to be a bit lower at 4.6 in 2013 and 4.3 in 2014.”
SAMA said in January inflationary pressures in the Kingdom should remain stable in the first three months of this year.
The world’s top oil exporter has recovered since a 2009 downturn, helped by heavy public spending on welfare and housing construction, driven in part by reaction to unrest elsewhere in the Arab world.
Asked if he was concerned about the high level of bank lending to the private sector, Al-Mubarak said: “Not at all. The bank lending to the private sector is consistent with all the policies that SAMA puts (in place) and monitors.”
Bank lending to Saudi Arabia’s private sector rose 15.9 percent in January, only slightly slower than a 16.4 percent increase in the previous month, which was the fastest clip since February 2009.
He said the ratio of loans to deposits among the banks was about 75 percent, below the level of 85 percent which SAMA sets as a cap to limit loan growth.
“It is positive that the banks continue to lend to the private sector,” he said, adding that the quality of banks’ lending portfolios had improved in recent years, resulting in fewer bad loans.
Al-Mubarak also said SAMA’s key policy rates — the repo and reverse repo — were appropriate since there were no signs of economic overheating, and their current levels of 2.0 percent and 0.25 percent, respectively, served banks quite well.
“The only (development that would change this interest rate policy) is if it causes overheating to the economy. We don’t see it overheating. It is quite normal,” he said.
Saudi Arabia pegs its riyal to the dollar, which Al-Mubarak said continued to serve its economy well, repeating the country’s long-standing policy position.
Because of the peg, SAMA needs to keep its policy rates near US benchmarks to avoid excessive pressures on its currency link.
SAMA last changed its repo rate in January 2009, cutting it by 50 basis points to temper the impact of the global crisis. It reduced its reverse repo rate by 25 basis points in June 2009.
“As you notice throughout the world they are moving toward the very low interest rate and the objective of that is to continue to support lending to the private sector to participate in growth and create jobs,” Al-Mubarak added.
Al-Mubarak declined to provide a forecast for Saudi economic growth, saying SAMA took guidance from IMF predictions of 4.2 percent in 2013 and 3.8 percent in 2014.
Growth of the $ 728 billion Saudi economy, the largest in the Arab world, slowed to 6.8 percent last year from 8.5 percent in 2011, when it was buoyed by a higher oil output to compensate for shortages due to a civil war in Libya.

What's happening around Saudi Arabia

MAKKAH: Low-cost Haj packages are no longer available as the registration process has been completed.Announcing it, Abdulrahman bin Ali Al-Nafei, assistant deputy minister of Haj, said domestic Haj operators have completed registering names of pilgri...
JEDDAH: An African expat woman is being investigated for torturing her baby to death by pouring boiling water on her. The motive behind the vicious attack is unknown.The Board of Investigation and Prosecution in Jeddah has charged the woman with semi...
RIYADH: Over five million Overseas Filipinos Workers (OFWs), including more than one million in Saudi Arabia, observed “zero remittance day” on Friday, in protest against the random checking of boxes sent by them to their families back home by the Cu...
JEDDAH: Security authorities have arrested 45 people from different parts of the Kingdom for Daesh links in the past 10 days. Forty of the suspects, accused of terrorism, are Saudis. Others are 2 Yemenis, an Egyptian, a Palestinian, and a national of...
RIYADH: The Ministry of Health announced on Friday that two more people were infected with the Middle East Respiratory Syndrome (MERS) coronavirus. While no deaths were announced, the virus has already killed 26 people in just two weeks, from Aug. 16...
RIYADH: The government and courts have issued 35,010 penalties against citizens and expatriates for violating the country’s residency laws including fines and jail terms.Citizens and expatriates across the Kingdom were penalized for transporting, har...

Stay Connected

Facebook