Qatar inflation remaining steady, official figures show
Consumer Price Index for June reached 107.52 points, down from 107.59 recorded in May
Qatar’s stabilization of inflation aligns with its plans for economic growth
Updated 31 July 2024
Arab News
RIYADH: Qatar’s annual and monthly inflation rate remained steady in June despite a significant increase in key groups, official data revealed.
The National Planning Council has released the Consumer Price Index for June, which reached 107.52 points, down from 107.59 recorded in May.
This marks a 0.98 percent year-on-year rise from June 2023, despite a minor month-on-month decline of 0.07 percent from May of this year.
Qatar’s stabilization of inflation aligns with its plans for economic growth, as it commenced its Third National Development Strategy earlier in 2024.
The nation aims to accelerate economic development at an average annual rate of 4 percent until 2030 by expanding gas production, supporting sectors contributing to financial diversification, and creating specialized economic clusters.
The year-on-year CPI increase is primarily attributed to significant price hikes in five key groups.
Recreation and culture surged by 14.09 percent, while education rose by 3.42 percent.
Additional increments were observed in miscellaneous goods and services, with a 2.83 increase, clothing and footwear with 0.98 percent, and food and beverages with 0.09 percent.
Price levels fell in several categories – communication decreased by 4.62 percent, housing, water, electricity, and other fuel by 3.10 percent, and restaurants and hotels by 1.79 percent.
Health was down by 1.77 percent, furniture and household equipment by 1.71 percent, and transport by 0.32 percent. The tobacco category recorded no change.
A month-on-month comparison of the main CPI components for June reveals mixed trends.
Five groups saw price decreases, with food and beverages by 3.12 percent, clothing and footwear by 0.86 percent, transport by 0.61 percent, housing, water, electricity, and other fuel by 0.47 percent, and miscellaneous goods and services by 0.18 percent.
Prices increased in communication by 9.29 percent, recreation and culture by 1.24 percent, restaurants and hotels by 0.13 percent, and furniture and household equipment by 0.07 percent.
The education category experienced a slight increase of 0.04 percent, while tobacco and health remained unchanged from the previous month’s levels.
The NPC also revealed Qatar’s Producer Price Index for the industrial sector for June.
The PPI consists of four main industry sectors – mining, which accounts for 82.46 percent, manufacturing at 15.85 percent, electricity at 1.16 percent, and water, which comprises 0.53 percent.
June’s PPI is estimated at 115.73 points, showing an increase of 0.46 percent compared to May. On a year-on-year basis, the PPI increased by 6.31 percent.
In the mining and quarrying sector, the PPI for June went up by 0.67 percent compared to the previous month, primarily due to a price increase in crude petroleum and natural gas by 0.68 percent, with no change in other mining and quarrying.
On an annual basis the PPI for mining and quarrying rose by 6.61 percent, driven by a 6.63 percent increase in crude petroleum and natural gas, while other mining and quarrying saw a slight decrease of 0.02 percent.
The manufacturing sector recorded a decrease of 0.42 percent in June compared to the previous month.
This decline resulted from falling prices in five groups and rising prices in three others.
Price decreases were noted in cement and other non-metallic mineral products by 3.81 percent, basic metals by 2.24 percent, food products by 0.62 percent, as well as chemicals and chemical products by 0.55 percent, and refined petroleum goods by 0.43 percent.
Price increases were seen in rubber and plastics products by 19.49 percent, beverages by 0.90 percent, and printing and reproduction of recorded media by 0.16 percent.
Compared to the same month in 2023, the manufacturing PPI for June showed an increase of 5.02 percent.
The major groups contributing to this price increase were rubber and plastics products by 18.70 percent, refined petroleum products by 12.14 percent, and chemicals and chemical products by 4.21 percent, as well as food products by 3.45 percent, cement and other non-metallic mineral products by 2.97 percent, and beverages by 2.40 percent.
Decreases were observed in basic metals by 2.19 percent and printing and reproduction of recorded media by 0.33 percent.
The PPI for electricity, gas, steam, and air conditioning supply fell by 5.84 percent compared to May.
On a year-on-year basis, this category saw a decrease of 0.18 percent in June.
In the water supply sector, the PPI increased by 3.33 percent compared to May and showed a year-on-year increase of 6.47 percent.
JEDDAH: Reforms across Saudi Arabia’s financial landscape have significantly transformed the sector, driven by the Financial Sector Development Program, experts have told Arab News.
One of the key initiatives of the Kingdom’s Vision 2030, the program aims to promote income diversification, enhance savings, and provide a range of financing and investment opportunities.
These reforms have been implemented under the close oversight of the Saudi Central Bank, known as SAMA, which has also played a crucial role in fostering the growth of fintech and digital banking through a supportive regulatory framework and various initiatives.
Speaking to Arab News, Yaseen Ghulam, associate professor of economics and director of research and consulting center at the Riyadh-based Al-Yamamah University, named five major reforms in Saudi Arabia’s financial sector that have had significant impact on the overall efficiency and competitiveness of financial institutions.
He noted that the FSDP, which was launched in 2017, has enhanced the Saudi Stock Exchange, or Tadawul, to become a globally competitive investment platform with robust market infrastructure.
Yaseen Ghulam, associate professor of economics and director of research and consulting center at the Riyadh-based Al-Yamamah University. Supplied
“The plan is to enhance trading infrastructure and settlement processes to meet international best practices, raising market capitalization, liquidity, and value to over $3 trillion, and facilitating the acquisition of money by overseas investors,” he said.
He added that this has led to greater online platforms, advanced fintech capabilities, integrated custody and clearing regimes, and greater investor rights, as well as increased alignment with sustainable finance norms, and improved transparency procedures.
He further added that Tadawul’s inclusion in the MSCI Emerging Markets Index in 2019 enhanced its standing as a global player.
Ghulam mentioned that fintech innovation has been a significant focus since the launch of the Fintech Saudi initiative in 2018, which has propelled Saudi Arabia toward becoming the leading hub for the sector in the region.
He added that by 2022, the program had helped the fintech ecosystem grow quickly, as seen by the establishment of many innovative businesses and the widespread use of digital payments.
“By enacting progressive laws, SAMA enabled this fintech revolution. In order to promote development, it built a regulatory sandbox for supervised testing of cutting-edge technologies, created specialist licenses for fintech businesses, and made banking infrastructure and application programming interfaces available,” he added.
This view was echoed by financial analyst Khalid Gaber Al-Zaidiy, who told Arab News that SAMA’s regulatory framework is key to the growth of fintech and digital banking in the Kingdom.
He added that some of the key impacts of this framework include encouraging innovation while maintaining financial stability.
“SAMA supports fintech innovation through initiatives like the Fintech Sandbox, enabling startups to develop and test products within a regulated environment,” he said.
By enforcing strict cybersecurity standards and regulations related to the protection of personal financial data, he added, SAMA enhances consumer trust in using fintech solutions. “This helps the sector grow sustainably and securely,” Al-Zaidiy said.
He added that by licensing new digital banks, SAMA fosters competition and supports digital economy growth, advancing the sector.
“The Central Bank’s policies promote financial inclusion and expand access to banking through digital solutions, creating opportunities for fintech companies,” the analyst added.
Green growth and international trust
Ghulam also highlighted the Kingdom’s commitment to green finance, stating that it has made strides in promoting environmentally friendly investments and projects in line with global sustainability trends.
This includes the issuance of green bonds as part of its Vision 2030 goals. “Saudi Arabia has positioned itself as a key player in the worldwide transition to a more environmentally responsible economic model through these proactive initiatives,” he said.
Ghulam emphasized that Saudi Arabia has implemented strategic policies to increase international investor participation, which has led to a record increase in foreign capital inflows and a boost in confidence in the Saudi financial system.
“Growing inflows reflect a global increase in trust in the stability of Saudi Arabia’s financial system,” he said.
He praised the establishment of the National Debt Management Center, adding that by creating specialized bodies to oversee the management of the country’s debt, Saudi Arabia has taken decisive action to improve public financial control and preserve a sound fiscal position.
Explaining how the rise of fintech and digital banking is reshaping customer expectations and experiences in the financial services industry, Ghulam stated that one of the most significant initiatives of the FSDP is the implementation of open and digital banking through fintech.
“As a result, Saudi Arabia is leading the fintech revolution, with over 226 fintech enterprises already in existence, due to its well-functioning telecommunication sector and heavy investment by government and telecom companies in infrastructure set up to bring higher speed and reliability of connections,” he said.
More importantly, the economist added, STC Bank, the Saudi Digital Bank, and the payment system of Sarie are leading the way in consumer digital banking and payment systems.
Ghulam further stated that digital banking saves customers time, reduces transaction costs, and fosters competition and economic growth.
“It is enhancing the financial sector by introducing new products and services for Saudi consumers and businesses. With consumer consent, these banking facilities allow third-party providers access to financial data, driving innovation in the industry,” he said, adding that digital wallets, smartphone apps, and online banking have become essential for managing accounts and transactions.
“Opening a bank account can now be done online, benefiting rural areas by eliminating the need for in-person visits. This shift has also improved financial inclusion by providing credit, insurance, and services to previously marginalized individuals and regions,” Ghulam said.
SMEs thriving
Highlighting how financial reforms are addressing the specific funding challenges faced by small businesses in Saudi Arabia, Ghulam noted that the Kingdom has over 1.3 million SMEs.
He noted that, like other developed countries, these companies face challenges in securing necessary financing due to collateral limitations and higher credit risk.
“The impetus for reforms in relation to SMEs funding has come from Vision 2030 and is related to FSDP. One of the main objectives of FSDP and related reforms is to amplify the financing of micro, SMEs within the banking system and to set up institutions such as SME Bank, Monsha’at, and Venture Capital companies to help improve thefinancing and ecosystem,” he said.
He noted that the FSDP aims to expand the current 10 percent ratio of SMEs financing in the banking system to 11 percent by 2025.
More importantly, to show its continued and strong support for these businesses, he said, the government is recommending that financial institutions devote 20 percent of their loan portfolios to this industry.
“Monsha’at has introduced several schemes in this regard. These include Funding Gate, an online one-stop-shop for financing, aggregating lenders and services, KAFALAH program, a loan guarantee service to help reduce risk and increase appetite for lenders, and Saudi Venture Capital Co., as well as Esterdad Initiative, and loans facilitated through the Indirect Lending Initiative,” he said.
The academic added that the fintech revolution resulting from reforms is also helping increase funding for SMEs in this regard, saying: “B2B FinTech solutions are highly sought after as they solve issues with credit availability, payment processing, and money management.”
Ghulam further said that the Public Investment Fund is also helping improve SMEs funding, along with oil giant Saudi Aramco’s Taleed program which offers more than SR3 billion in funding to eligible firms.
“All these varied funding channels would have not been possible without reforms and government push to help the smaller businesses that are the backbone of the future Saudi economy that is less reliant on fossil fuel income,” the economist said.
With capital of over SR3 billion, the Taleed Program targets sustainable growth of SMEs (File/AN)
The establishment of the Financial Literacy Entity within the FSDP is a key strategy in Saudi Arabia’s efforts to boost financial literacy and promote digital banking, aligning with Vision 2030’s goals.
“Several fintech businesses, such as Darahim and Fatafeat, are attempting to increase financial literacy in the Kingdom. In a significant step, the Saudi Ministry of Education mandated the inclusion of a ‘Financial Knowledge’ course in school curricula,” Ghulam said.
He further said that Thameen and Smart Investor, two awareness efforts run by the Capital Market Authority, are targeted at the financial literacy of adults and young people, respectively.
“A 2023 report from the SAMA states that citizens’ financial literacy has increased due to these activities. These policies are indeed bearing fruit: as of 2023, 38 percent of adults were estimated to have a basic understanding of financial concepts, up from 30 percent in 2021,” the academic said.
Saudi corporate lending sees highest growth in 2 years as bank loans reach $782bn
Updated 17 January 2025
Dayan Abou Tine
RIYADH: Saudi Arabia’s bank loans surged to SR2.93 trillion ($782 billion) in November, marking a 13.33 percent year-on-year increase — the highest growth rate in 22 months.
According to figures from the Saudi Central Bank, also known as SAMA, corporate loans were the main driver, surging 17.28 percent to SR1.58 trillion.
This marks the highest annual growth for corporate loans among the lending activity data available in SAMA’s reporting since 2021.
Real estate activities led the charge, representing 21 percent of corporate lending and growing by 32 percent to SR328 billion.
Wholesale and retail trade accounted for 13 percent of corporate lending, reaching SR201.6 billion with an annual growth rate of 10.62 percent.
The manufacturing sector, a key component of Vision 2030’s economic diversification goals, represented 12 percent share at SR182.44 billion.
Electricity, gas, and water supplies contributed 11 percent to the total corporate share, growing significantly by nearly 27.74 percent to reach SR178.56 billion.
Notably, professional, scientific, and technical activities, though holding a smaller 0.53 percent share of corporate credit, witnessed the most significant surge, with a 54.44 percent annual growth rate to SR8.38 billion.
Education loans followed real estate with the third-highest growth rate, increasing by 29.93 percent to SR8 billion.
On the personal loans side, which includes various financing options for individuals, the sector grew 9.05 percent annually to SR1.35 trillion. This expansion underscores the continued confidence in consumer lending and the Kingdom’s economic diversification strategies.
According to Standard Chartered’s Global Market Outlook for 2025, lower interest rates are expected to boost private sector growth, particularly benefiting borrowing-sensitive industries in Saudi Arabia, the UAE, and Qatar.
The report highlighted that despite a forecasted slowdown in global growth from 3.2 percent to 3.1 percent, the Gulf Cooperation Council is poised to remain a bright spot, driven by robust non-oil sector expansion and strategic investments that support economic diversification.
Saudi Arabia’s economic transformation under Vision 2030 exemplifies a coordinated effort across government institutions, financial sectors, and private enterprises to drive sustainable growth and diversification.
Sectors like education, science and technology, and utilities are gaining significant momentum, fueled by substantial funding aimed at enhancing their contribution to the nation’s GDP.
The Kingdom is making significant investments in research and development, with the government accounting for the largest share of expenditure.
In 2025, education represented 16 percent of the national budget, employing the highest percentage of R&D workers and underscoring its pivotal role in expanding research capabilities.
Additionally, the surge in real estate activity reflects the broader infrastructure and giga-projects in progress, reinforcing the nation’s development agenda.
Recent shifts in global monetary policy, mirrored by the Saudi Central Bank’s interest rate adjustments in line with the US Federal Reserve, are set to make borrowing more affordable.
Lower interest rates will further stimulate lending, supporting key industries and accelerating the Kingdom’s ambitious transformation.
Strong capital buffers
According to data from SAMA, Saudi banks’ regulatory capital to risk-weighted assets stood at 19.2 percent in the third quarter of 2024, down slightly from 19.5 percent a year earlier.
Despite this modest decline, the ratio remains well above the Basel Committee on Banking Supervision’s minimum requirement of 8 percent, reflecting the strong capitalization and financial resilience of the Kingdom’s banking sector.
The Tier 1 capital ratio, which measures the core capital banks hold to absorb losses relative to their risk-weighted assets, reached 17.7 percent.
Tier 1 capital primarily consists of high-quality capital such as common equity and disclosed reserves. This high ratio demonstrates the soundness of the banking system in supporting economic growth while safeguarding against potential risks.
According to a study by the International Monetary Fund, Saudi banks are well-capitalized, profitable, and resilient to severe macroeconomic shocks.
Solvency stress tests and sensitivity analyses indicate their ability to withstand adverse scenarios, including significant downturns in real estate prices and sectoral loan portfolio defaults.
While banks demonstrate sufficient capacity to handle liquidity shocks, the report highlighted the need to address funding concentration risks.
The IMF noted that SAMA is refining its stress-testing methodologies and recommended enhancing data collection and monitoring large funding and credit exposures, particularly in relation to major construction and infrastructure projects.
To further strengthen credit risk modeling, SAMA should incorporate granular data on households and nonfinancial corporations, reflecting the evolving dynamics of the Kingdom’s economic transformation, according to the IMF.
SAMA data for the third quarter of 2024 indicated that non-performing loans net of provisions to capital fell to 2.1 percent, down from 2.2 percent in the same period last year.
This decline suggests an improvement in the quality of bank lending portfolios and the effectiveness of provisioning strategies.
According to the IMF, several factors help mitigate credit risk within the rapidly expanding real estate loan portfolio in Saudi Arabia.
Most mortgages are offered at fixed rates, which shield borrowers from interest rate fluctuations, and are structured with full recourse, minimizing the likelihood of strategic defaults.
Additionally, approximately 80 percent of retail borrowers are government employees, whose income is likely to remain stable during economic downturns. Furthermore, it is reported that the majority of mortgages are salary-assigned, providing further assurance of repayment.
Oil Updates — crude set for 4th week of gains as investors assess US sanctions impact
Brent up 2.3 percent so far this week, WTI adds 3.3 percent
China GDP tops forecast, but oil refinery output declines in 2024
Updated 17 January 2025
Reuters
LONDON, Jan 17 : Oil prices edged up on Friday, heading for a fourth consecutive week of gains, as the latest US sanctions on Russian energy trade heightened expectations for oil supply disruptions.
Brent crude futures were trading up 36 cents or 0.4 percent higher at $81.65 per barrel by 2:13 p.m. Saudi time, having gained 2.4 percent so far this week.
US West Texas Intermediate crude futures were up 53 cents or 0.7 percent at $79.21 a barrel, having climbed 3.5 percent for the week.
Last Friday, the Biden administration unveiled broader sanctions targeting Russian oil producers and tankers.
“Supply concerns from US sanctions on Russian oil producers and tankers, combined with expectations of a demand recovery driven by potential US interest rate cuts, are bolstering the crude market,” said Toshitaka Tazawa, an analyst at Fujitomi Securities.
“The anticipated increase in kerosene demand due to cold weather in the United States is another supportive factor.”
Investors are also anxiously waiting to see if more supply disruptions will emerge after Donald Trump returns to the White House next Monday.
“Mounting supply risks continue to provide broad support to oil prices,” ING analysts wrote in a research note, adding that the new Trump administration is expected to take a tough stance on Iran and Venezuela, the two main suppliers of crude oil.
Expectations for better demand lent some support to the oil market. Data showed inflation easing in the US, the world’s biggest economy, bolstering hopes of interest rate cuts.
Traders are also assessing fresh data from China, the world’s top oil importer. Its economy fulfilled the government’s ambitions for 5 percent growth last year.
But China’s oil refinery throughput in 2024 fell for the first time in more than two decades, except for the pandemic-hit year of 2022, government data also showed on Friday.
Weighing on oil prices were expectations of a halt in attacks by Yemen’s Houthi militia on ships in the Red Sea in the wake of a Gaza ceasefire deal.
The Houthis’ attacks have disrupted global shipping, forcing ships to make longer and more expensive journeys around southern Africa for more than a year.
The Israeli cabinet is set to approve a deal with militant group Hamas for a ceasefire in Gaza, Prime Minister Benjamin Netanyahu’s office said on Friday.
Chief economists expect global economic conditions to weaken in 2025
Updated 16 January 2025
Arab News
DUBAI: More than half of chief economists expect economic conditions to weaken in 2025, according to a World Economic Forum report released on Thursday.
“The growth outlook is at its weakest in decades and political developments both domestically and internationally highlight how contested economic policy has become,” said Aengus Collins, head of Economic Growth and Transformation at the WEF.
The outlook is more positive in the US, with 44 percent of chief economists predicting strong growth in 2025, up from 15 percent last year. However, 97 of respondents in the “Chief Economists Outlook” report said they expected public debt levels to rise, while 94 percent forecast higher inflation.
Europe, on the other hand, remains the weakest region for the third consecutive year, with 74 percent of economists expecting weak or very weak growth.
In the Middle East and North Africa region, 64 percent expect moderate growth while a quarter expect weak growth.
Collins said the global economy was under “considerable strain,” worsened by increasing pressure on integration between economies.
A total of 94 percent of economists predict further fragmentation of goods trade over the next three years, while 59 percent expect the same for services trade. More than 75 percent foresee higher barriers to labor mobility and almost two-thirds expect rising constraints on technology and data transfers.
The report suggests that political developments, supply chain challenges and security concerns are critical factors that will likely drive up costs for both businesses and consumers over the next three years.
Businesses are expected to respond by restructuring supply chains (91 percent), regionalizing operations (90 percent), focusing on core markets (79 percent) or exiting high-risk markets (76 percent).
When the economists were asked about the factors contributing to current levels of fragmentation, more than 90 percent pointed to geopolitical rivalries.
This is largely due to the “strategic rivalry” between the US and China, according to the report, along with other geopolitical disturbances, particularly in Ukraine and the Middle East.
Global fragmentation is likely to result in a more strained global landscape with chief economists expecting an increase in the risk of conflict (88 percent), a more bipolar system (79 percent) and a widening divide between the Global North and South (64 percent).
“In this environment, fostering a spirit of collaboration will require more commitment and creativity than ever,” Collins said.
Australian-Saudi Business Council hosts joint forum to help boost trade
Event brought together more than 35 participants from both nations to discuss key opportunities for trade and investment
Updated 16 January 2025
Arab News
RIYADH: The Australian-Saudi Business Council hosted a joint forum on Thursday to discuss the enhancement of collaboration and trade between the two countries.
Led by Daniel Jamsheedi, the council’s country director, the event brought together more than 35 participants from both nations to discuss key opportunities for trade and investment.
The event, a collaboration with the Federation of Saudi Chambers, aimed to build on the success of the first Australian Pavilion at the Future Minerals Forum in Riyadh this week, and further strengthen the economic partnership between the two countries, organizers said.
Sam Jamsheedi, the president of the council, thanked the federation for the vital role it played in the success of the forum.
“The Federation of Saudi Chambers is one of our key stakeholders and our partner within the Kingdom,” he said.
“As a business council, we appreciate the efforts put in to enable this joint business forum to succeed.”
