Saudi foreign assets to dip by $90bn in 2009

Saudi Arabia's push to fund its record budget this year to ease the fallout of the global economic crisis is expected to depress its foreign assets by nearly $90 billion (Dh330bn), a key Saudi financial centre said yesterday.

The Riyadh-based Jadwa Investments and Financing said the Gulf kingdom's economy could have shrunk in the first four months of 2009 because of a sharp cut in its oil output but expected an improvement in the non-oil sector in the next months because of high government spending.

From about $506.3bn at the end of 2008, the foreign assets of the kingdom's central bank, Saudi Arabian Monetary Agency (Sama), are projected to dive by nearly $90bn to $416.5bn at 2009-end because of Sama's withdrawal from the assets to fund public expenditure.

Sama has already withdrawn nearly $43.8bn since November to finance spending and prevent the Arab World's largest economy from contracting because of the global crisis and lower crude prices.

According to Jadwa, Sama is likely converting the money received from maturing foreign government debt into riyals for local spending rather than reinvesting it in new foreign government debt in addition to drawing down deposits in foreign banks, which have fallen by a combined $18.9bn in March and April.

The report showed Sama has resorted to withdrawal from overseas assets because of a sharp fall in its oil income in the first five months of 2009 due to a decline of more than one million barrels per day in output and 50 per cent in oil prices.

Jadwa expected the Kingdom's oil production to dive to an average 8.1 million bpd this year from 9.2 million bpd in 2008.

This will ally with lower prices to depress the income of the world's oil powerhouse by 67 per cent to nearly $92bn in 2009 from a record $280bn in 2008. The expected oil income this year is far lower than the budgeted spending of SR475bn ($128bn).

Jadwa said the Saudi economy had contracted in the first four months of this year and expected real growth to be negative through the year despite high public spending and growth in some other sectors. Its forecasts showed Saudi Arabia's real gross domestic product could slip by about 0.5 per cent in 2009 but the nominal GDP could plummet by 30.9 per cent mainly because of the sharp fall in crude prices this year.

Inflation is projected to dip to 6.2 per cent from about 10 per cent in 2008 while the actual budget balance is expected to switch to a deficit of around SR69bn in 2009 from a record surplus of SR590bn in 2008.

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