Riyadh – Mubasher: Since oil prices plunged in 2014, liquidity trends in the Saudi banking system have reversed, according to Moody's research report published on Thursday.
Customer deposit growth of 12.1% versus 11.8% growth in credit between 2013 and 2014, while the opposite trend in recent years: since 2014, average deposit growth has decreased to 1% versus credit growth of 9.5%.
Liquidity has tightened even more since February 2016, when deposit outflows led to a 3.1% year-on-year contraction in total deposits as of 30 July 2016, the report said.
Government deposits were down 4.4% in July 2016 from a year earlier, as funds were needed to help finance its large fiscal deficit, which we estimate at around 12% for 2016.
Private-sector deposits also went down 2.6% year-on-year as of July, affected by government spending cuts and weakening economic growth.
Last week, the Saudi Arabia Monetary Authority (SAMA) announced that it would inject about SAR 20 billion ($5.3 billion) of time deposits on behalf of government agencies to Saudi banks, and introduced seven-day and 28-day repurchase agreements.
"We expect Saudi Arabia’s non-oil GDP growth to be 1.6% this year and 2.4% in 2017, versus the 2010-16 average of 6.2%, Moody's said.
SAMA’s money injection should help stabilize banks’ regulatory loan-to-deposit ratio for the next six months, which we expect to decrease 100 basis points to around 84% as of September 2016 from 85% in June 2016.
