Saudi Arabia Bank Loans Cooling to ‘Healthy Levels’: Arab Credit

Saudi Arabian banks are scaling back lending as the withdrawal of domestic stimulus has slowed economic growth.

Bank loan growth to the private sector was 13 per cent in October, or SAR1.1 trillion ($293 billion), the slowest rate of expansion since May last year, central bank data showed Nov. 28. While it was the sixth straight monthly drop, credit expansion in the Arab world’s biggest economy remains faster than in Persian Gulf neighbors the United Arab Emirates and Kuwait.

The winding down of almost $800 billion in stimulus measures introduced since 2008 is forecast to trim economic growth this year to 4.2 per cent, from 5.1 per cent in 2012, according to a Bloomberg survey of 20 analysts. The Al Saud ruling family unveiled plans to create jobs and build roads, ports and industrial cities to ward off the global financial crisis, and then in 2011 announced extra spending to increase employment and salaries as protests toppled leaders across the Middle East.

“The strong comeback of the credit market since 2009 is decelerating to more sustainable and healthy levels,” John Sfakianakis, chief investment strategist at MASIC in Saudi Arabia, said by phone from Riyadh on Nov. 26. “The economy and the private sector are expanding but at a slower pace compared to last year.”