RIYADH, 4 June 2007 — April SAMA data released earlier than usual on Monday show continued increase in liquidity (M3) for the second straight month, following two months (January and February) of small declines and a huge increase in December.
M3 increased by a whopping SR14.5 billion from SR678 billion in March to a new record level of SR692 billion in April. This comes on the heels of a SR22 billion increase in March.
All components of M3 grew in April.
Demand deposits show its seventh monthly rise in April, growing by SR8 billion after a SR6 billion increase in March. Time and savings deposits, except in January 2007, grew for nine months since June 2006.
In April 2007, it increased by SR1.7 billion, following March’s SR8 billion increase. Quasi-money deposits also increased in April by SR4 billion, after a SR8 billion increase in March.
Trend data showed that the pickup in liquidity growth in the first four months of this year is a continuation of the trend from November 2006. On the other side of the banking sector’s balance sheet, loan growth picked up in March and April, but remains quite down compared to previous years.
Bank loans and advances to the private sector grew 10.1 percent in April over the same month one year ago. The figure was 8.1 percent in March and 6.4 percent February, thus indicating a reversal of earlier declining trend. However, the numbers remain significantly lower than growth one year ago. In April 2006. in the midst of the Saudi stock market correction, bank lending grew 32 percent, while just before the correction, it grew 42 percent in January 2006.
The marked slowdown in loan growth since January 2006 was primarily a result of the stock market correction as banks cut back their stock market exposure, small investors pulled out of the stock market, and SAMA introduced a number of new requirements on banks to reduce their exposure to personal loans.
Khan H. Zahid is chief economist and vice president at Riyad Bank office in Riyadh.
