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Hans-Peter Huber, PhD Chief Investment Officer Riyad Capital 6775 Takhassusi St. – Olaya Riyadh 12331-3712 [email protected]
Saudi Economic Chartbook
First Quarter 2019
Saudi Economic Chartbook First Quarter 2019
Page 1
Table of Contents:
GDP Data ………………….…………. 2
Monetary and Financial
Indicators ………………………….… 3
Fiscal Balance and
Government Debt…………………. 6
Private Spending and
Foreign Trade …............................... 7
Non-Oil Business Climate
Indicators …………………...……….. 8
Inflation Indicators …………….... 9
Real Estate Market …………..... 10
Oil Market …….………………………12
Foreign Exchange and
Interest Rates …….………...……… 13
Saudi Balance of Payments ..….15
Saudi Equity Market ………...... 16
Saudi Economic Outlook …....... 18
Credit and Broad Money Supply Picking Up
After a contraction in 2017
credit to the private sector
has continuously picked up
during last year to reach
3.0% yoy by end of 2018.
source: SAMA
Growth Acceleration of the Non-Oil Economy into 2019
GDP growth of the overall economy has notably picked up in the second half
of 2018. This has primarily been the result of a substantial oil output expan-
sion. For 2019 we expect a moderate growth slowdown as the oil production
will broadly stabilize at last year’s level.
There are increasing signs of a further growth acceleration of the non-oil
economy. Credit growth to the private sector has started to sustainably re-
cover and has reached 3.0% yoy in December 2018 (see figure below).
Purchasing Manager Indices as a proxy for the business climate of the non-oil
economy have temporarily stalled in H2 2018. However, at the beginning of
2019 we see encouraging signs of a pick-up which may indicate further accel-
erating economic activity into 2019.
On the back of the latest OPEC agreement, Saudi Arabia has started to scale
down its oil production in December after a peak output at 11.0 mbd reached
in November. Based on secondary sources, January production has been fur-
ther trimmed to 10.2 mbd.
SAR money market interest rates picked up in the course of 2018 with the 3M
SAIBOR ending the year at 3.0%. Based on our new baseline scenario of only
one single FED rate hike in 2019, SAR interest rates are close to their peak.
TASI has seen a strong start into 2019, which has essentially been fueled by
substantial foreign institutional capital inflow. However, overall trading vol-
umes have remained subdued in the first weeks of the year.
Credit to the private sector, %yoy
Money supply M3, %yoy
-5.0
0.0
5.0
10.0
15.0
20.0
12/12 12/13 12/14 12/15 12/16 12/17 12/18
Saudi Economic Chartbook First Quarter 2019
Page 2
source: GASTAT source: GASTAT
Real GDP growth Overall economy, quarterly % yoy Real GDP growth Non-oil private sector, quarterly % yoy
Gross Domestic Product (GDP) Overall Economy and Institutional Sectors
Real GDP growth of the overall economy accelerated
in H2 2018. Based on preliminary GASTAT data, Q3
growth picked up to 2.5% and our GDP tracker mod-
el indicates a Q4 growth rate of about 4.0%. This is
primarily the result of a substantial growth contri-
bution by the oil sector which, according to our
models, has reached about 6.0% in Q4 2018 on the
back of a substantial oil output expansion.
source: GASTAT, RC source: GASTAT
Real GDP growth Oil-sector, quarterly % yoy Nominal GDP growth Non-oil private sector, quarterly % yoy
GDP deflator Non-oil private sector % yoy
CPI inflation % yoy
Figure 2:
Nominal and Real GDP Non-Oil Private Sector
Figure 1:
Real GDP Overall Economy and Oil Sector
Figure 3:
Monthly GDP Tracker of Overall Economy
Figure 4: GDP Deflator and CPI Inflation
Real GDP growth Overall economy, quarterly, %yoy
Real GDP growth Tracker Overall economy, monthly, %yoy
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Q3/12 Q3/13 Q3/14 Q3/15 Q3/16 Q3/17 Q3/18-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Q3/12 Q3/13 Q3/14 Q3/15 Q3/16 Q3/17 Q3/18
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
12/12 12/13 12/14 12/15 12/16 12/17 12/18
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Q3/12 Q3/13 Q3/14 Q3/15 Q3/16 Q3/17 Q3/18
Saudi Economic Chartbook First Quarter 2019
Page 3
source: SAMA source: SAMA
Monetary base, % yoy Aggregate M3, % yoy
Monetary Aggregates, Credit and Commercial Banks’ Deposits
Broad money supply M3 picked up in H2 2018 and
grew in December by 2.8% yoy. This is the result of
an expansion of commercial banks’ deposits over
this period. Meanwhile, credit to the private sector
shows signs of a sustainable rebound after the con-
traction in the course of 2017. By end of last year
credit growth reached 3.0% yoy after having con-
tracted by -0.6% throughout the year 2017.
Banks’ claims on private sector, % yoy, l.h.sc.
source: SAMA source: SAMA
Banks’ claims on private sector, % mom, r.h.sc.
Aggregate M1, % yoy Aggregate M2, % yoy
Banks’ overall customer deposits, % yoy, l.h. sc.
Banks’ overall customers deposits, % mom, r.h.sc.
Figure 2:
Growth Rate Monetary Aggregates M2 and M3
Figure 1:
Growth Rate Monetary Base and Aggregate M1
Figure 4: Growth of Commercial Banks’ Deposits
Figure 3:
Growth of Credit to the Private Sector
-10
-5
0
5
10
15
20
25
12/12 12/13 12/14 12/15 12/16 12/17 12/18
-3
0
3
6
9
12
-5
0
5
10
15
20
12/12 12/13 12/14 12/15 12/16 12/17 12/18
-10
-5
0
5
10
15
20
25
12/12 12/13 12/14 12/15 12/16 12/17 12/18
-3
0
3
6
9
12
-5
0
5
10
15
20
12/12 12/13 12/14 12/15 12/16 12/17 12/18
Saudi Economic Chartbook First Quarter 2019
Page 4
source: SAMA source: SAMA
Claims on the private sector as % of total bank deposits Claims on the government as % of total bank deposits
Excess liquidity in the banking system clearly im-
proved in Q4 2018 due an increase of commercial
banks’ deposits at SAMA. This is also reflected in the
loan-deposit-ratio to the private sector which de-
clined from 89.2 in October to 86.4 in December. On
the other hand, outstanding loans to the government
sector (i.e. government bonds held by commercial
banks) overall stabilized in Q4 2018 at 21%.
source: SAMA source: SAMA
Gross foreign assets as % of total assets Excess liquidity as % of total assets
Commercial Banks Key Ratios
Net foreign assets as % of total assets
Figure 1:
Private Sector Loan-Deposit-Ratio
Figure 2:
Government Sector Loan-Deposit-Ratio
Figure 3:
Foreign Assets to Total Assets Ratio
Figure 4:
Excess Liquidity to Total Assets Ratio
75.0
80.0
85.0
90.0
95.0
12/12 12/13 12/14 12/15 12/16 12/17 12/184.0
8.0
12.0
16.0
20.0
24.0
12/12 12/13 12/14 12/15 12/16 12/17 12/18
0.0
4.0
8.0
12.0
16.0
12/12 12/13 12/14 12/15 12/16 12/17 12/1810.0
12.0
14.0
16.0
18.0
20.0
12/12 12/13 12/14 12/15 12/16 12/17 12/18
Saudi Economic Chartbook First Quarter 2019
Page 5
source: SAMA
source: SAMA source: SAMA
Total foreign currency reserves at SAMA, in bln SAR, l.h.sc. Total government deposits at SAMA, in bln SAR, l.h.sc.
As a result of the fiscal spending increase in Q4 2018 government deposits at SAMA declined over this period by overall 90bln SAR of which 60bln in De-cember. This also translated into an outflow of for-
eign currency reserves of 40bln SAR at SAMA during this period which was funded through a correspond-ing reduction in foreign deposits while foreign secu-rity investments remained unchanged.
Investments in foreign securities, in bln SAR Government and gov. institutions deposits at commercial banks, in bln SAR, l.h.sc.
source: SAMA
SAMA Balance Sheet: Key Elements of Assets and Liabilities
Figure 1:
Foreign Currency Reserves at SAMA
Figure 2:
Government Deposits at SAMA
Figure 3:
Breakdown of Foreign Currency Reserves at SAMA
Figure 4:
Government Deposits at Commercial Banks
Monthly change in foreign currency reserves at SAMA, in
bln SAR, r.h.sc.
Monthly change in total government deposits at SAMA,
in bln SAR, r.h.sc.
Foreign currencies & deposits abroad, in bln SAR Monthly change in governmental deposits at commercial banks, in bln SAR, r.h.sc.
-100
-60
-20
20
60
100
1,600
1,800
2,000
2,200
2,400
2,600
2,800
12/12 12/13 12/14 12/15 12/16 12/17 12/18
-150
-100
-50
0
50
100
150
600
800
1000
1200
1400
1600
1800
12/12 12/13 12/14 12/15 12/16 12/17 12/18
0
500
1,000
1,500
2,000
2,500
12/12 12/13 12/14 12/15 12/16 12/17 12/18
-60
-30
0
30
60
90
200
240
280
320
360
400
12/12 12/13 12/14 12/15 12/16 12/17 12/18
Saudi Economic Chartbook First Quarter 2019
Page 6
source: MoF source: MoF
Oil revenues
Non-oil revenues
Employee compensation (salaries & wages)
The last quarter 2018 was characterized by a sharp
increase in fiscal spending, similar to the previous
two years. This resulted in a notable expansion of
the quarterly deficit to 87 bln SAR which was funded
through a corresponding withdrawal of government
deposits at SAMA as illustrated on page 5. However,
due to record low deficits in the first three quarters
the yearly deficit 2018 dropped to -136 bln SAR.
source: MoF source: MoF
Net deficit/surplus Outstanding local government debt, in bln SAR
Other current expenditure
Quarterly Fiscal Balance and Outstanding Government Debt
Figure 1:
Quarterly Fiscal Revenues (in bln SAR)
Figure 2:
Quarterl Fiscal Expenditure (in bln SAR)
Figure 3:
Quarterly Fiscal Deficit/Surplus (in bln SAR)
Figure 4:
Outstanding Government Debt (End of Quarter)
Capital expenditure
Outstanding foreign government debt, in bln SAR
5279
101 102 112 101 94129 114
184154 155
32
76 2752 32 63
48
113
52
89
69 77
84
155
128
153144
164
142
241
166
274
223232
0
50
100
150
200
250
300
350
400
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018
99 103 98 109 94 103 107137
113131
110 120
5272
48
115
47
7449
139
62
102
85
10324
38
35
37
29
33
35
83
26
48
36
95
175
213
181
261
170
210191
358
201
281
231
318
0
50
100
150
200
250
300
350
400
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018
-91
-58 -54
-108
-26
-47 -49
-117
-34
-7 -7
-87
-140
-120
-100
-80
-60
-40
-20
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018
182222 239
213 205 205239 260 277 289 295 305
3838 103 103
137
137
184206
248 255 255
182
260277
317 308
341
376
443
484
537550 560
0
100
200
300
400
500
600
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018
Saudi Economic Chartbook First Quarter 2019
Page 7
source: SAMA source: Thomson Reuters
Point-of-sales transactions, % yoy
3-Month Moving Average, % yoy
TR IPSOS Saudi Primary Consumer Sentiment Index
Point-of-sales transactions further expanded in the
last quarter 2018 but growth momentum gradually
slowed down. Meanwhile, investor sentiment con-
tinued to recover from its lows at the beginning of
2018. The growth slowdown in non-oil exports dur-
ing Q4 2018 may be explained by a drop in prices of
petrochemical products which constitute a majority
of non-oil exports.
source: GASTAT source: GASTAT
Non-Oil exports, % yoy Imports, % yoy
3-Month Moving Average
Private Spending Indicators and Non-Oil Foreign Trade
Figure 1:
Point-of-Sales Transactions
Figure 2:
Consumer Sentiment
Figure 3:
Growth of Non-Oil Exports
Figure 4:
Growth of Imports
3-Month Moving Average, % yoy 3-Month Moving Average, % yoy
-20
-10
0
10
20
30
40
12/12 12/13 12/14 12/15 12/16 12/17 12/18
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
12/12 12/13 12/14 12/15 12/16 12/17 12/18-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
12/12 12/13 12/14 12/15 12/16 12/17 12/18
50
55
60
65
70
01/13 01/14 01/15 01/16 01/17 01/18 01/19
Saudi Economic Chartbook First Quarter 2019
Page 8
source: Markit source: Markit
Emirates NBD PMI Composite
6-Month Moving Average
Emirates NBD PMI Output
Saudi Purchasing Manager Indices witnessed a nota-
ble improvement in January 2019. The jump of the
composite index was primarily driven by the PMI
New orders which surged from 58.4 to 62.2. This is a
promising sign for future economy activity at the
beginning of this year. On the other hand, the drop
of the PMI output prices illustrates that companies
in general still do not have pricing power.
source: Markit source: Markit
Emirates NBD PMI New Orders
Non-Oil Private Sector Business Climate Indicators
Emirates NBD PMI Output Prices
6-Month Moving Average
6-Month Moving Average 6-Month Moving Average
Figure 1:
Purchasing Manager Index Composite
Figure 2:
Purchasing Manager Index Output
Figure 3:
Purchasing Manager Index New Orders
Figure 4:
Purchasing Manager Index Output Prices
50
52
54
56
58
60
62
64
01/13 01/14 01/15 01/16 01/17 01/18 01/1954
56
58
60
62
64
66
68
70
01/13 01/14 01/15 01/16 01/17 01/18 01/19
48
52
56
60
64
68
72
01/13 01/14 01/15 01/16 01/17 01/18 01/1946
48
50
52
54
56
01/13 01/14 01/15 01/16 01/17 01/18 01/19
Saudi Economic Chartbook First Quarter 2019
Page 9
source: GASTAT source: GASTAT
CPI inflation, % yoy CPI inflation, % yoy
CPI inflation dropped to -1.9%yoy in January 2019
from 2.2%yoy in December 2018. This is due to the
impact of the fiscal reform measures, notably the
VAT introduction and the energy price increases,
which have fallen out of the observation period. This
effect has been most pronounced in the case of the
transportation sub-index (gasoline prices) which
declined from 12.1% to -0.8%.
source: GASTAT source: GASTAT
CPI inflation, sub-index Transport, % yoy
WPI inflation, % yoy
Consumer and Wholesale Price Inflation
CPI inflation, sub-index Furnishings, household equipment &
maintenance, % yoy
CPI inflation, sub-index Food and beverages, % yoy
CPI inflation, sub-index Housing, water, electricity, gas and
other fuels, % yoy
Figure 1:
Consumer Price Inflation All Items
Figure 2:
Consumer Price and Wholesale Price Inflation
Figure 3:
CPI Inflation Food & Housing
Figure 4:
CPI Inflation Furnishings & Transportation
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
01/13 01/14 01/15 01/16 01/17 01/18 01/19
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
01/14 01/15 01/16 01/17 01/18 01/19-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
01/14 01/15 01/16 01/17 01/18 01/19
-8.0
-4.0
0.0
4.0
8.0
12.0
16.0
20.0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Saudi Economic Chartbook First Quarter 2019
Page 10
source: MOJ, RC
Real estate transactions remained subdued in H2
2018 with total transaction value diminishing by
about 40% in a year-on-year comparison for both
Q3 and Q4. For the full year 2018, the total value of
real estate transactions turned out to be 36% below
the previous year with residential transactions de-
clining by -31% while the commercial transaction
value decreased by -46%.
source: MOJ, RC source: MOJ, RC
Total value of quarterly transactions, %yoy
Number of quarterly transactions, %yoy
Real Estate Market: Transaction Activity
Riyadh Region
Makkah Region
Eastern Region
All Other Regions
Total value of quarterly transactions, %yoy
Number of quarterly transactions, %yoy
source: MOJ, RC
Total value of quarterly transactions, %yoy
Number of quarterly transactions, %yoy
Figure 1:
Quarterly Real Estate Transactions Overall Country
Figure 3:
Quarterly Commercial Real Estate Transactions
Figure 4:
Breakdown of Transaction Value by Regions (Q4 2018)
Figure 2:
Quarterly Residential Real Estate Transactions
-50
0
50
100
150
200
Q4/11 Q4/12 Q4/13 Q4/14 Q4/15 Q4/16 Q4/17 Q4/18
-50
0
50
100
150
200
Q4/11 Q4/12 Q4/13 Q4/14 Q4/15 Q4/16 Q4/17 Q4/18
-50
0
50
100
150
200
Q4/11 Q4/12 Q4/13 Q4/14 Q4/15 Q4/16 Q4/17 Q4/18
44.4%
22.6%
16.6%
16.4%
Saudi Economic Chartbook First Quarter 2019
Page 11
source: GASTAT source: GASTAT
In Q4 2018 real estate prices accelerated their
downturn. This particularly applied to residential
real estate prices which dropped in Q4 by -6.0% yoy
after a decline of -3.7% in Q3. Price indices are still
dominated by the price development of unused land
which constitutes about 93% of all real estate trans-
actions and, as a consequence, has a corresponding-
ly strong weighting in the overall index.
source: GASTAT source: GASTAT
Residential villas price index
Residential price index Residential land price index
Commercial land price index Commercial price index
Real Estate Market: Price Indices
Residential apartments price index
Commercial centers price index
Commercial shops & galleries price index
Figure 1:
Residential and Commercial Price Indices
Figure 2:
Residential and Commercial Land Price Indices
Figure 3:
Residential Villas and Apartments Price Indices
Figure 4:
Commercial Shops and Centers Price Indices
70
75
80
85
90
95
100
105
Q4/13 Q4/14 Q4/15 Q4/16 Q4/17 Q4/1870
75
80
85
90
95
100
105
Q4/13 Q4/14 Q4/15 Q4/16 Q4/17 Q4/18
80
85
90
95
100
105
Q4/13 Q4/14 Q4/15 Q4/16 Q4/17 Q4/1880
85
90
95
100
105
Q4/13 Q4/14 Q4/15 Q4/16 Q4/17 Q4/18
Saudi Economic Chartbook First Quarter 2019
Page 12
source: JODI, Bloomberg source: JODI
Saudi Arabian crude oil production, in 1000 bd.
Saudi Arabian total oil refinery output in 1000 bd.
After having increased its crude production from
May to November 2018 by 1.0 mbd to 11.0 mbd,
Saudi Arabia started to cut output in December to
10.6 mbd, in adherence to the OPEC agreement.
Based on secondary sources, January output is ex-
pected to be further scaled down to 10.2 mbd. OPEC
production has been reduced from October to De-
cember 2018 from 32.8 mbd to 31.9 mbd.
source: JODI, Bloomberg source: Bloomberg
Brent oil price OPEC crude oil production, in 1000 bd
WTI oil price
Oil Market Statistics: Production, Exports, Refinery and Prices
Saudi Arabian crude oil export, in 1000 bd. Saudi Arabian total oil refinery export, in 1000 bd.
Figure 1:
Saudi Crude Oil Production and Exports
Figure 2:
Saudi Crude Refinery Output and Exports
Figure 3:
OPEC Crude Output
Figure 4:
Oil Prices
6500
7000
7500
8000
8500
9000
9500
10000
10500
11000
11500
12/12 12/13 12/14 12/15 12/16 12/17 12/18
0
500
1000
1500
2000
2500
3000
3500
12/12 12/13 12/14 12/15 12/16 12/17 12/18
29000
30000
31000
32000
33000
34000
12/11 12/12 12/13 12/14 12/15 12/16 12/17 12/18
20
30
40
50
60
70
80
90
02/15 02/16 02/17 02/18 02/19
Saudi Economic Chartbook First Quarter 2019
Page 13
source: Bloomberg source: Bloomberg, JP Morgan
12-month forward exchange rate USD/SAR
The USD/SAR 12-months FX-forward premium has
declined to historically low levels of approx. 60 bp in
February 2019 after having spiked to 170 bp in De-
cember due to a strong temporary correction of oil
prices down to 50 USD for Brent during that month.
Meanwhile, the trade-weighted SAR index gradually
weakened in real and nominal terms since Novem-
ber after a strong appreciation in H1 2018.
source: Bloomberg source: Bloomberg, JPMorgan
SAR Real (CPI-adjusted) trade-weighted exchange rate index
SAR Nominal trade-weighted exchange rate index
Foreign Exchange: Forward Rates and Effective Exchange Rate Index
12-month forward exchange rate USD/SAR
SAR Nominal trade-weighted exchange rate index
SAR Real (CPI-adjusted) trade-weighted exchange rate index
Figure 1:
12-Months Forward Exchange Rate SAR/USD
Figure 2:
SAR Nominal and Real Effective Exchange Rate
Figure 3:
12-Months Forward Exchange Rate SAR/USD in
the Long Term
Figure 4:
SAR Nominal and Real Effective Exchange Rate in the
Long Term
3.73
3.75
3.77
3.79
3.81
3.83
3.85
02/15 02/16 02/17 02/18 02/19104
108
112
116
120
124
128
02/15 02/16 02/17 02/18 02/19
3.65
3.70
3.75
3.80
3.85
2000 2002 2004 2006 2008 2010 2012 2014 2016 201880
90
100
110
120
130
140
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Saudi Economic Chartbook First Quarter 2019
Page 14
source: Bloomberg source: Bloomberg
3-months SIBOR (Saudi Interbank Offered Rate)
5-year Swap rate SAR
The softer stance of the US Federal Reserve has
caused markets to rule out any rate hike throughout
2019. As a consequence, USD rates have gradually
decreased across the entire yield curve. At the short-
end 3-month SAR interest rates remained sticky at
3.0% which translated into a SAIBOR-LIBOR spread
widening most recently. At the longer end of the
yield curve, SAR Swap rates also gradually declined.
source: Bloomberg source: Bloomberg
30-year maturity Reverse repo rate SAMA
5-year maturity 3-month SAIBOR (Saudi Interbank Offered Rate)
5-year Swap rate USD 3-months US LIBOR (London Interbank Offered Rate)
Interest Rates: Money Market, Capital Market and Central Bank Rates
3-month SAIBOR (Saudi Interbank Offered Rate)
3-month US LIBOR (London Interbank Offered Rate)
Figure 1:
3-Months SAIBOR vs. USD LIBOR
Figure 2:
5-Year Swap Rate SAR vs. USD
Figure 3:
KSA USD-Bonds Yield Spread to US Treasuries
Figure 4:
Central Bank Rate and 3-Months SAIBOR
10-year maturity
SAMA official repo rate
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
02/15 02/16 02/17 02/18 02/190.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
02/15 02/16 02/17 02/18 02/19
0.00
1.00
2.00
3.00
4.00
5.00
6.00
2004 2006 2008 2010 2012 2014 2016 20180.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
11/16 05/17 11/17 05/18 11/18
Saudi Economic Chartbook First Quarter 2019
Page 15
source: SAMA source: SAMA
Current account balance, quarterly in bln SAR Foreign workers’ remittances, quarterly in bln SAR
(remittances outflow as part of Current account balance)
The current account surplus further improved in Q3
2018 to 110 bln SAR. This was mainly the result of
higher oil exports. But also foreign workers’ remit-
tances continued to decline since their peak in 2016
as about 1.4 mln expat workers had left the country
since mid-2016. The financial account witnessed a
strong outflow in Q3 2018, largely mitigating the
current account surplus during that period.
source: SAMA source: SAMA
Saudi Balance of Payments
Figure 1:
Current Account Balance
Figure 2:
Foreign Workers’ Remittances
Figure 3:
Financial Account Balance
Figure 4:
Contribution to Balance of Payments
Current account balance
Errors & omissions
Financial account balance
Net change in foreign
reserve assets
Financial account balance (excluding changes in foreign
reserve assets), quarterly in bln SAR
(+ capital inflows, - capital outflows)
-100
-50
0
50
100
150
200
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2012 2013 2014 2015 2016 2017 2018
-40
-36
-32
-28
-24
-20
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2012 2013 2014 2015 2016 2017 2018
-125
-100
-75
-50
-25
0
25
50
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2012 2013 2014 2015 2016 2017 2018
-200
-150
-100
-50
0
50
100
150
200
-200
-150
-100
-50
0
50
100
150
200
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2012 2013 2014 2015 2016 2017 2018
Saudi Economic Chartbook First Quarter 2019
Page 16
source: Bloomberg source: Tadawul
Tadawul All-share index Average daily trading value for Tadawul, in mln SAR
TASI showed a strong performance in the first
weeks of the year, appreciating by about 9% until
mid-February. The key driver behind this positive
development have been foreign institutional inves-
tors which were net buyers of Saudi equities to an
amount of 5.4 bln SAR over the first five weeks of
2019. However, overall trading volumes remained
low at about 3.0 bln SAR average daily traded value.
source: Tadawul source: Tadawul
Tadawul: Saudi Equity Market Statistics
10-Week Moving Average
Retail Mutual funds
Institutional DPM Corporates
Government related entities (GRE) Foreign investors total (incl. GCC)
Figure 1:
Tadawul All-Share Index
Figure 2:
Tadawul Total Trading Value
Figure 3:
Weekly Net Purchase by Ownersip (in bln SAR)
Figure 4:
Weekly Net Purchase by Ownersip (in bln SAR)
5000
5500
6000
6500
7000
7500
8000
8500
9000
9500
10000
02/15 02/16 02/17 02/18 02/19
0
1000
2000
3000
4000
5000
6000
01/16 07/16 01/17 07/17 01/18 07/18 01/19
-6
-4
-2
0
2
4
6
8
10
02/17 08/17 02/18 08/18 02/19
in bln SAR
-6
-4
-2
0
2
4
6
8
10
02/17 08/17 02/18 08/18 02/19
in bln SAR
Saudi Economic Chartbook First Quarter 2019
Page 17
source: Bloomberg source: Bloomberg
TASI quarterly EPS in SAR, l.h.sc
In January 2019, TASI was primarily driven by the
well performing banking sector (+13.5%) which
constitutes about 45% of the overall market. Be-
sides, the food&beverages and the utilities sector
also managed to outperform the index during the
first month of the year. The strong index perfor-
mance has driven trailing and forward valuation mul-
tiples for TASI above their long-term average.
source: Bloomberg source: Bloomberg
PE ratio TASI, 12-month trailing earnings
Long-term average
TASI 4Q trailing EPS in SAR, r.h.sc.
PE ratio TASI, 12-month forward earnings
Long-term average
Tadawul: Saudi Equity Market Statistics
Figure 1:
Performance TASI Sectors Jan 2019YTD
Figure 2:
Quarterly Earnings TASI
Figure 3:
Valuation TASI: PE-Ratio Trailing
Figure 4:
Valuation TASI: PE-Ratio Forward
Performance in % YTD, including dividends
-1.7-1.7-1.5
-0.60.50.7
1.93.03.13.53.63.7
5.96.3
7.69.0
9.59.5
13.513.813.8
-5 0 5 10 15
EnergyPharma, Bio & LS
Food & Staples RetailingRetailing
REITSHealthcare Equip&Svc
Consumer Durables & App.Insurance
Real EstateMedia
TransportationDiversified Financials
Capital GoodsCommercial & Prof. Svc
MaterialsConsumer Services
TASITelco Services
BanksUtilities
Food & Beverages
250
300
350
400
450
500
550
0
25
50
75
100
125
150
Q4/10 Q4/11 Q4/12 Q4/13 Q4/14 Q4/15 Q4/16 Q4/17 Q4/18
6
8
10
12
14
16
18
20
02/09 02/11 02/13 02/15 02/17 02/198
10
12
14
16
18
20
22
24
26
02/09 02/11 02/13 02/15 02/17 02/19
Saudi Economic Chartbook First Quarter 2019
Page 18
Saudi Economic Outlook
Oil, Inflation and Interest Rates GDP and Fiscal Indicators
source: GASTAT, SAMA, RC source: GASTAT, SAMA, Bloomberg, RC
The Saudi economy recovered in 2018, primarily due
to a strong rebound of the oil sector which had con-
tracted in the year before. For 2019, we expect growth
of the non-oil private sector to further accelerate from
1.7% to 2.2% on the back of an expansionary fiscal
policy pursued by the government throughout this
year. The fiscal deficit will gradually widen to -5.7% of
GDP (after -4.6% in 2018) as in particular oil revenues
will turn out to be somewhat lower than budgeted for
this year. The fiscal deficit will primarily be funded by
a combination of local and global borrowing and, sec-
ondly, by withdrawals from government deposits. We,
therefore, expect sovereign debt to rise to 22.0% of
GDP in 2019.
We forecast an average oil price of 65 USD for Brent in
2019 which is about 9% lower than the average price
in 2018. Saudi oil production is expected to be broadly
unchanged to last year at 10.3 mbd in 2019 with grad-
ually lower output in H1 and an expansion thereafter.
Growth of the oil sector will, therefore, be lower than
last year and is pencilled in at 1.5%. As a consequence
of the reduced oil sector growth contribution, overall
GDP growth will moderately slow down to 1.8% in
2019 after 2.2% in the year before.
CPI inflation is forecasted to drop from 2.5% to 0.3%
this year as the impact of last year’s fiscal reform
measures, notably the VAT introduction and the en-
ergy price increases, will fall out of the observation.
This forecast is based on the assumption that there
won’t be any new fiscal reform measures in 2019
besides the reduction of the VAT sales threshold from
1 mln SAR to 375k SAR which may have a mild infla-
tionary impact in 2019.
We have lowered our FED interest rate policy expec-
tations for 2019 to one single rate hike throughout
the year. As a consequence, we expect the official
repo rate to be raised to 3.25% and forecast the 3M
SAIBOR rate to peak around 3.15%.
The current account surplus is projected to diminish
to 6.2% of GDP after 9.4% in 2018, primarily due to
lower oil export revenues in 2019. The unprecedent-
ed capital inflow expected in the context of the inclu-
sion of Saudi equities in major EM indices, accompa-
nied by a first issuance of international bonds by Ar-
amco, will help to cushion the structural deficit of the
private financial account balance and, combined with
the current account surplus, potentially lead to a con-
siderable balance of payment surplus in 2019.
Facts and Forecasts at a Glance
2014 2015 2016 2017 2018 2019f
Real GDP Growth
Overall economy 3.7 4.1 1.7 -0.7 2.2 1.8
Non-oil Private sector 5.4 3.4 0.1 1.5 1.7 2.2
Government sector 3.7 2.7 0.6 0.7 2.8 1.5
Oil sector 2.1 5.3 3.6 -3.1 2.8 1.5
Fiscal Balance and Government Debt
Fiscal Balance in bln SAR -71 -362 -311 -238 -136 -179
Fiscal Balance in % GDP -2.5 -14.8 -12.9 -9.3 -4.6 -5.7
Government debt in bln SAR 44 142 317 443 560 690
Government debt as % GDP 1.6 5.8 13.1 17.3 19.1 22.0
Trade and Current Account
Trade Balance in bln SAR 690 166 209 382 636 544
Trade Balance in % GDP 24.3 6.8 8.6 14.9 21.7 17.3
Current Account in bln SAR 277 -213 -90 57 275 195
Current Account in % GDP 9.8 -8.7 -3.7 2.2 9.4 6.2
2014 2015 2016 2017 2018 2019f
Oil Prices and Production (yearly average)
Brent price (USD pb) 99.5 53.7 44.1 54.8 71.7 65.0
WTI price (USD pb) 92.9 48.8 43.3 50.9 64.9 57.0
OPEC Basket price (USD pb) 96.2 49.5 40.7 52.4 69.8 63.0
KSA oil production (mln bd) 9.7 10.2 10.5 9.9 10.3 10.3
Inflation and Interest Rates (year end)
CPI Inflation (yearly average) 2.24 1.22 2.05 -0.84 2.47 0.30
3M SAIBOR SAR 0.86 1.55 2.04 1.90 2.98 3.15
Reverse Repo Rate 0.25 0.50 0.75 1.50 2.50 2.75
Official Repo Rate 2.00 2.00 2.00 2.00 3.00 3.25
Tadawul (year end data)
Total Return in % 0.7 -14.6 8.2 3.7 12.1 n.a.
P/E-ratio 18.2 15.9 17.2 17.0 16.1 15.1
P/B-ratio 2.1 1.6 1.7 1.6 1.7 1.8
RoE 11.5 10.2 9.7 9.5 10.8 11.9
Saudi Economic Chartbook First Quarter 2019
Page 19
Disclaimer
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