Saudi economy ‘can hit IMF growth forecast’

Ahmed Al-Kholifey, governor of the Saudi Arabian Monetary Authority. (Reuters)
Updated 17 September 2018
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Saudi economy ‘can hit IMF growth forecast’

  • The IMF said last month that growth in the non-oil sector was expected to accelerate as the Kingdom moved ahead with economic reforms

DUBAI: Saudi Arabia’s economy can achieve an International Monetary Fund forecast of 1.9 percent gross domestic product growth this year, the central bank governor said on Sunday.

The IMF said last month that growth in the non-oil sector was expected to accelerate as the Kingdom moved ahead with economic reforms.

Ahmed Al-Kholifey, governor of the Saudi Arabian Monetary Authority (SAMA), made the comments during a press conference in Riyadh.

SAMA also said its foreign reserves have been increasing this year and a large proportion of recent capital outflows had been due to foreign investment by other Saudi institutions, Reuters reported.

Ayman bin Mohammed Al-Sayari, deputy governor for investment, said the foreign reserves increased last month to $509-510 billion at the end of August from $502 billion in July.

The deputy governor said Saudi institutional investors were coming to the central bank to exchange their local currency for hard currency that would be used to invest abroad.

“A lot of the capital flows or at least a considerable portion of that ... figure was merely some other institutional investors, quasi-sovereign, who have elected to ... invest more internationally than locally,” he told the news conference.

This pattern was seen in the first two quarters of the year, he said.

Brent oil has jumped near $80 a barrel from $67 at the end of 2017, swelling Saudi Arabia’s current account surplus and shrinking its state budget deficit.


Oil edges up on looming Iran sanctions, but US-China trade war caps gains

Updated 2 min 59 sec ago
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Oil edges up on looming Iran sanctions, but US-China trade war caps gains

  • The US sanctions on the oil sector in Iran are set to start on November 4
  • other producers may struggle to fully make up for the expected Iran disruption, and that oil prices could rise further
SINGAPORE: Brent crude oil prices rose back above $80 a barrel on Monday as markets were expected to tighten once US sanctions against Iran’s crude exports are implemented next month.
Benchmark Brent crude oil futures were at $80.26 a barrel at 0646 GMT, up 48 cents, or 0.6 percent, above their last close.
US West Texas Intermediate (WTI) crude futures were at $69.60 a barrel, up 48 cents, or 0.7 percent.
The US sanctions on the oil sector in Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), are set to start on November 4. The United States under President Donald Trump is trying to reduce Iranian oil exports to zero to force the country to renegotiate an agreement on its nuclear program.
US Treasury Secretary Steven Mnuchin told Reuters on Sunday that it would be harder for countries to get sanction waivers than it was during the previous Obama administration, when several countries, especially in Asia, received them.
OPEC agreed in June to boost supply to make up for the expected disruption to Iranian exports.
However, an internal document reviewed by Reuters suggested OPEC is struggling to add barrels as an increase in Saudi supply was offset by declines elsewhere.
Fatih Birol, executive director of the International Energy Agency (IEA), said on Monday that other producers may struggle to fully make up for the expected Iran disruption, and that oil prices could rise further.
Some relief may come from North America, where US drillers added four oil rigs in the week to Oct. 19, bringing the total count to 873, Baker Hughes energy services firm said on Friday, raising the rig count to the highest level since March 2015.
The US rig count is an early indicator of future output. With activity increasing after months of stagnation, US crude production is also expected to continue to rise.
Reflecting rising US crude exports, the Intercontinental Exchange said its new Permian West Texas Intermediate crude futures contract deliverable in Houston, Texas, will begin trading on Monday.
In addition to the potential for rising oil supply, the ongoing Sino-American trade dispute is expected to start dragging on demand.
“The full impact of the US-China trade war will hit markets in 2019 and could act as a considerable drag on oil demand next year, raising the possibility of the market returning to surplus,” said Emirates NBD bank in a note.
Shipping brokerage Eastport said “Chinese manufacturing is beginning to slow” and that “Trump’s proposal of slapping ... tariffs on additional ... Chinese goods from 1 January would be a further drag on trade.”
K.Y. Lin, spokesman for Taiwan’s Formosa Petrochemical Corp, a major fuel refiner, said “weaker demand in Europe and the US” was already affecting gasoline profit margins as excess fuel is being sent to Asia.