Low oil prices depress Saudi foreign asset growth

Saudi Arabia's foreign assets gained about SR48 billion (Dh47bn) in October, but the growth was far lower than in previous months due to a plunge in oil prices, according to official Saudi figures.

From about SR1.679 trillion at the end of September, the foreign assets of the kingdom's central bank swelled to SR1.727trn at the end of October, showed the figures by the Saudi Arabian Monetary Agency (Sama).

The foreign assets at the end of October are at their highest ever level but their growth was lower by nearly SR20bn from the average SR60bn increase recorded in the previous few months.

Sama gave no reason for the slower growth but oil prices continued their rapid decline last month to tumble below $50 towards the end of November from their historic peak of nearly $150 a barrel in July. Despite the decline, the increase in the foreign assets last month showed Saudi Arabia is still recording a surplus in its budget on a monthly basis.

The kingdom, the world's oil powerhouse which sits atop 25 per cent of the global crude deposits, is expected to record its highest ever budget surplus this year of more than half a trillion riyals as its crude prices are projected to average above $100, nearly double the level forecast in its budget.

Sama's figures showed there was an increase in both its deposits with banks abroad and investment in foreign securities last month.

Deposits swelled from about SR354.1bn to SR373.2bn and securities from SR1.165trn to nearly SR1.172trn. There was also an increase of about SR9bn in other assets to SR33bn.

Sama's assets recorded their highest growth in 2008, leaping by more than SR500bn since January 1 because of the surge in oil prices and the kingdom's output, which averaged above nine million bpd. The assets dipped to one of their lowest levels of below SR100bn in 1998 before they began their rapid climb to reach SR197bn in 2002. By the end of 2007, the assets had rocketed to SR1.196trn.

Besides rebuilding its foreign assets, high oil prices have also allowed Saudi Arabia to slash its public debt from over 100 per cent of its GDP eight years ago to only about 19 per cent, or nearly SR267bn, at the end of 2007. The debt is expected to fall to 12 to 14 per cent by the end of this year, according to Saudi and IMF forecasts.

Bankers said the kingdom's strong financial position and the sharp drop in its debt would enable it to face a fallout from the current global financial crisis. In a study last month, the Saudi American Bank (Samba) expected Sama's assets to jump to $670bn by the end of 2009 and $878bn in 2010. "The Kingdom's main financial balances retain a solid outlook. On average, the current account should post surpluses of 34 per cent of gross domestic product in 2008-2010, while the fiscal surplus should remain about 20 per cent of GDP, albeit moderating," Samba said in its latest bulletin.

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