RIYADH, 18 September 2006 — There has been no letup in bank lending, despite the fall in liquidity in July. Saudi Arabian Monetary Agency (SAMA) data for July show that bank loans and advances to the private sector increased for the third straight month, from SR432.7 billion in June to SR437.6 billion, an increase of almost SR5 billion.
And, if we ignore the small drop last April (by SR700 million), bank lending to the private sector has been growing every month since December 2004 — the longest and the fattest rising streak ever. During this twenty-month long upward ride, loans and advances to the private sector increased by a whopping SR150 billion! Since the middle of 2003 (July), when the Kingdom’s current and 4th oil boom started, bank loans to the private sector have grown by SR243 billion. During this same period, total bank deposits, the funding side, grew SR186 billion, leaving banks with a “gap” of just SR57 billion.
• The total value of residential property in developed countries rose by more than $30 trillion to $70 trillion, over the past five years — eclipsing the combined GDPs of those nations.
• Consumer spending and residential construction have accounted for 90 percent of the total growth in the American GDP over the last four years, and more than 40 percent of all private-sector jobs created since 2001 have been in housing-related sectors, including construction and mortgage brokering.
• 23 percent of all American houses bought last year were for investment. Last year, 42 percent of first-time buyers — and 25 percent of all buyers put no money down — most vulnerable to rate hikes.
• Liquid coal is an alternative energy source in the news of late.
US, China, Australia, India, South Africa and Poland have the largest reserves of coal, with the US alone holding 26 percent of the world’s total coal reserves — equivalent to more than 12 times the entire oil reserves of Saudi Arabia!
• In a recent report entitled, “Globalization and emerging economies: Facing the inevitable,” PriceWaterhouseCoopers, predicts the world at 2050:
- In US dollar terms, China’s economy will be almost as large as the US while India will be third. Brazil will be as big as the Japanese, and Indonesia and Mexico will be larger than Germany and the UK.
- The collective size of the ‘E7’ economies (China, India, Brazil, Russia, Indonesia, Mexico, and Turkey) will be around 25 percent larger than that of the current G-7 (US, Japan, Germany, UK, France, Italy, and Canada).
- China recently replaced America as the world’s largest exporter of IT products, with its share of world exports growing from 1.9 percent in 1990 to 6 percent in 2003. In 2004, its total trade surpassed $1.1 trillion, making it the world’s third-largest trading nation after the US and Germany, surpassing even Japan.
- By 2010, India will earn $87 billion in revenues from software and services, compared to $150 million in 1991 and $17.2 billion in 2004.
• Do we view them as competitors or customers? Multinationals and capital view them as customers and investment destinations, while labor, SMEs and governments view them as threats.
(Khan H. Zahid is chief economist and vice president at Riyad Bank. He is based in Riyadh.)
