Saudi Economic Chartbook
Fourth Quarter 2019
Hans Peter Huber, PhDChief Investment Officer
Page 1
Saudi Economic Chartbook Fourth Quarter 2019
Table of Contents:
GDP Data ……………..………….. 2
Monetary and Financial
Indicators …………………………... 3
Fiscal Balance and Government
Debt…………………………...……….6
Private Spending and
Foreign Trade …........................7
Non-Oil Business Climate
Indicators ………………...………... 8
Inflation Indicators ……………... 9
Real Estate Market ….………... 10
Oil Market …….……………………12
Foreign Exchange and
Interest Rates …….……...……..13
Saudi Balance
of Payments ………………………15
Saudi Equity Market ….……. 16
Saudi Economic
Outlook …...............................18
Consumer Price Deflation Ending Due to Stabilizing Housing Rents
CPI Inflation is expected to
turn positive again as hous-
ing rents, which are the
most important item in the
subindex Housing, water&
electricity, are expected to
stabilize in 2020.
source: GASTAT
The Period of CPI Deflation is Ending
The Saudi economy exhibits a distinct growth divergence between the oil
sector and the non-oil sector economy in 2019. While growth of the oil sec
tor has declined due to a crude output reduction, the non-oil private sector
economy has been gaining pace in the course of the year.
The strength of the non-oil economy is illustrated by the point-of-sales
transactions, a proxy for private consumption, which have substantially
picked up and the PMI Composite, a gauge for the business climate, which
has reached a 4-years' high at the beginning of the 4th quarter.
The deflation period for Saudi consumer prices is about to end and inflation
is expected to turn positive again by beginning of next year. This is primarily
due to a stabilization of housing rents after a strong decline in the last two
years (see chart below).
Transaction activity in the Saudi real estate market has continued to recover
during the third quarter. Transaction turnover has climbed by 72% com
pared to the previous year's period, while the number of transactions has
soared by 94%.
The US and the Saudi central bank have cut their key interest rates since July
in three steps by a total of 0.75%. As a consequence, interest rates across
the entire yield curve have generally been in decline in H2 2019.
The Saudi equity market has seen some profit taking in the course of the
third quarter after a strong performance in the first half 2019 due to the in
clusion of Saudi equities in MSCI and FTSE Emerging Market indices. The
market correction has been accompanied by declining trading volumes.
CPI inflation, % yoy , l.h.sc.
CPI inflation, sub-index Housing, water, electricity, % yoy, r.h.sc.
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2012 2013 2014 2015 2016 2017 2018 2019
Page 2
Saudi Economic Chartbook Fourth Quarter 2019
source: GASTAT source: GASTAT
Real GDP growth Overall economy, quarterly % yoy Real GDP growth Non-oil private sector, quarterly % yoy
Gross Domestic Product (GDP) Overall Economy and Institutional Sectors
In H1 2019 the oil sector GDP contracted by-1.0%
due to the OPEC output cut agreement while the
non-oil private sector economy witnessed strong
growth momentum with +2.9%. Based on our GDP
tracker model, this growth divergence has carried
over into the third quarter where a notable crude oil
output reduction has caused overall GDP growth to
drop temporarily into negative territory.
source: GASTAT, RC source: GASTAT
Real GDP growth Oil-sector, quarterly % yoy Nominal GDP growth Non-oil private sector, quarterly % yoy
GDP deflator Non-oil private sector % yoy
CPI inflation % yoy
Figure 2:
Nominal and Real GDP Non-Oil Private Sector
Figure 1:
Real GDP Overall Economy and Oil Sector
Figure 3:
Monthly GDP Tracker of Overall Economy
Figure 4:
GDP Deflator and CPI Inflation
Real GDP growth Overall economy, quarterly, %yoy
Real GDP growth Tracker Overall economy, monthly, %yoy
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Q2/13 Q2/14 Q2/15 Q2/16 Q2/17 Q2/18 Q2/19
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Q2/13 Q2/14 Q2/15 Q2/16 Q2/17 Q2/18 Q2/19
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
Q2/13 Q2/14 Q2/15 Q2/16 Q2/17 Q2/18 Q2/19
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
10/12 10/13 10/14 10/15 10/16 10/17 10/18 10/19
Page 3
Saudi Economic Chartbook Fourth Quarter 2019
source: SAMA source: SAMA
Monetary base, % yoy Money supply M3, % yoy
Monetary Aggregates, Credit and Commercial Banks’ Deposits
Liquidity in the Saudi economy is sustainably
improving with narrow money supply M1 growing by
7.6% yoy and broad money supply M3 expanding by
4.9% yoy in October. Meanwhile, credit to the
private sector shows a growth rate of 3.5% yoy at
the beginning of Q4. Major credit driver are still
residential mortgage loans which expanded by a
remarkable 33% yoy in Q3 2019.
Banks’ claims on private sector, % yoy, l.h.sc.
source: SAMA source: SAMA
Banks’ claims on private sector, % mom, r.h.sc.
Money supply M1, % yoy Money supply M2, % yoy
Banks’ overall customer deposits, % yoy, l.h. sc.
Banks’ overall customers deposits, % mom, r.h.sc.
Figure 2:
Growth Rate Money Supply M2 and M3
Figure 1:
Growth Rate Monetary Base and Money Supply M1
Figure 4:
Growth of Commercial Banks’ Deposits
Figure 3:
Growth of Credit to the Private Sector
-15
-10
-5
0
5
10
15
20
10/13 10/14 10/15 10/16 10/17 10/18 10/19
-10
-5
0
5
10
15
20
10/13 10/14 10/15 10/16 10/17 10/18 10/19
-3
0
3
6
9
12
-5
0
5
10
15
20
10/13 10/14 10/15 10/16 10/17 10/18 10/19
-3
0
3
6
9
12
-5
0
5
10
15
20
10/13 10/14 10/15 10/16 10/17 10/18 10/19
Page 4
Saudi Economic Chartbook Fourth Quarter 2019
source: SAMA source: SAMA
Claims on the private sector as % of total bank deposits Claims on the government as % of total bank deposits
At the beginning of the 4th quarter 2019 the statu-
tory loan-deposit-ratio is still well below 80% which
implies sufficient liquidity in the banking sector. This
is particularly important with a view on the Aramco
IPO in December and its impact on the banks' bal-
ance sheets. Correspondingly, the banks' excess
liquidity amounts to a comparably high level of
18.6% of total assets by end of October.
source: SAMA source: SAMA
Gross foreign assets as % of total assets Excess liquidity as % of total assets
Commercial Banks Key Ratios
Net foreign assets as % of total assets
Figure 1:
Private Sector Loan-Deposit-Ratio
Figure 2:
Government Sector Loan-Deposit-Ratio
Figure 3:
Foreign Assets to Total Assets Ratio
Figure 4:
Excess Liquidity to Total Assets Ratio
Statutory private sector loan-deposit-ratio
72.0
76.0
80.0
84.0
88.0
92.0
10/13 10/14 10/15 10/16 10/17 10/18 10/194.0
8.0
12.0
16.0
20.0
24.0
28.0
10/13 10/14 10/15 10/16 10/17 10/18 10/19
0.0
4.0
8.0
12.0
16.0
10/13 10/14 10/15 10/16 10/17 10/18 10/1910.0
12.0
14.0
16.0
18.0
20.0
10/13 10/14 10/15 10/16 10/17 10/18 10/19
Page 5
Saudi Economic Chartbook Fourth Quarter 2019
source: SAMA
source: SAMA source: SAMA
Total foreign currency reserves at SAMA, in bln SAR, l.h.sc. Total government deposits at SAMA, in bln SAR, l.h.sc.
After a recovery phase until May 2019, SAMA for-
eign reserves declined from June to October by 104
bln SAR. This may be seen on the back of a corre-
sponding withdrawal of 83 bln SAR from govern-
ment deposits over the same period which reflects
a more expansionary fiscal policy by the govern-
ment since May. This typically leads to higher im-
ports which causes official reserves to decline.
Investments in foreign securities, in bln SAR Government and gov. institutions deposits at commer-cial banks, in bln SAR, l.h.sc.
source: SAMA
SAMA Balance Sheet: Key Elements of Assets and Liabilities
Figure 1:
Foreign Currency Reserves at SAMA
Figure 2:
Government Deposits at SAMA
Figure 3:
Breakdown of Foreign Currency Reserves at SAMA
Figure 4:
Government Deposits at Commercial Banks
Monthly change in foreign currency reserves at SAMA, in
bln SAR, r.h.sc.
Monthly change in total government deposits at SAMA,
in bln SAR, r.h.sc.
Foreign currencies & deposits abroad, in bln SAR Monthly change in governmental deposits at commercial banks, in bln SAR, r.h.sc.
-100
-60
-20
20
60
100
1,600
1,800
2,000
2,200
2,400
2,600
2,800
10/13 10/14 10/15 10/16 10/17 10/18 10/19
-150
-100
-50
0
50
100
150
600
800
1,000
1,200
1,400
1,600
1,800
10/13 10/14 10/15 10/16 10/17 10/18 10/19
0
500
1,000
1,500
2,000
2,500
10/13 10/14 10/15 10/16 10/17 10/18 10/19
-60
-30
0
30
60
90
200
240
280
320
360
400
10/13 10/14 10/15 10/16 10/17 10/18 10/19
Page 6
Saudi Economic Chartbook Fourth Quarter 2019
source: MoF source: MoF
Oil revenues
Non-oil revenues
Employee compensation (salaries & wages)
Fiscal revenues dropped in the third quarter by -7%
vs. the previous year's period and by -21% vs. the
previous quarter. This has primarily been the result
of lower oil revenues which can partly be explained
by lower oil prices. Fiscal spending has been higher
yoy (+3.5%) but notably lower compared to
Q2/2019 (-19%). As a result, the acumulated fiscal
deficit after 9 months amounts to -38 bln SAR.
source: MoF source: MoF
Net deficit/surplus Outstanding local government debt, in bln SAR
Other current expenditure
Quarterly Fiscal Balance and Outstanding Government Debt
Figure 1:
Quarterly Fiscal Revenues (in bln SAR)
Figure 2:
Quarterly Fiscal Expenditure (in bln SAR)
Figure 3:
Quarterly Fiscal Deficit/Surplus (in bln SAR)
Figure 4:
Outstanding Government Debt (End of Quarter)
Capital expenditure
Outstanding foreign government debt, in bln SAR
5279
101 102 112 101 94129
114
184154 159 169 175
13232
76 2752 32 63
48
113
52
89
6983 76
86
75
84
155
128
153144
164
142
241
166
274
223
242 245261
207
0
50
100
150
200
250
300
350
400
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018 2019
99 103 98 10994 103 107
137113
131110
143121 130 121
5272
48
115
47
7449
139
62
102
85
120
67
103
8624
38
35
37
29
33
35
83
26
48
36
105
29
61
31
175
213
181
261
170
210
191
358
201
281
231
367
218
294
239
0
50
100
150
200
250
300
350
400
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018 2019
-91
-58-54
-108
-26
-47 -49
-117
-34
-7 -7
-125
28
-34 -32
-140
-120
-100
-80
-60
-40
-20
0
20
40
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018 2019
182
260277
317308
341
376
443
484
537550560
611628
656
0
100
200
300
400
500
600
700
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2016 2017 2018 2019
Page 7
Saudi Economic Chartbook Fourth Quarter 2019
source: SAMA source: Thomson Reuters, Nielsen
Point-of-sales transactions, % yoy
3-Month Moving Average, % yoy
TR IPSOS Saudi primary consumer sentiment index, 3MMA, l.h.sc.
The growth rate of point-of-sales transactions has
substantially recovered since a trough by mid-year
and has reached 30% yoy in October. This strong
rebound in consumer spending is underpinned by a
still high consumer confidence of private households.
Meanwhile, non-oil export growth remains in nega-
tive territory, primarily reflecting the challenging glo-
bal market conditions of the petrochemical industry.
source: GASTAT source: GASTAT
Non-Oil exports, % yoy Imports, % yoy
Nielsen Saudi consumer confidence index, quarterly, r.h.sc.
Private Spending Indicators and Non-Oil Foreign Trade
Figure 1:
Point-of-Sales Transactions
Figure 2:
Consumer Sentiment
Figure 3:
Growth of Non-Oil Exports
Figure 4:
Growth of Imports
3-Month Moving Average, % yoy 3-Month Moving Average, % yoy
90
95
100
105
110
115
120
125
52.0
54.0
56.0
58.0
60.0
62.0
64.0
66.0
68.0
11/11 11/13 11/15 11/17 11/19
-20
-10
0
10
20
30
40
10/13 10/14 10/15 10/16 10/17 10/18 10/19
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
09/13 09/14 09/15 09/16 09/17 09/18 09/19
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
09/13 09/14 09/15 09/16 09/17 09/18 09/19
Page 8
Saudi Economic Chartbook Fourth Quarter 2019
source: Markit source: Markit
Emirates NBD PMI Composite
6-Month Moving Average
Emirates NBD PMI Output
By beginning of the 4th quarter, the business cli-
mate indicators of the Saudi non-oil economy still
point towards solid expansion. The PMI Composite
index reached 58.3 in October, a level last seen in
2015. Meanwhile, the PMI New Orders index, which
we consider as the best medium-term proxy for non
oil private sector GDP growth, is consolidating at an
elevated level .
source: Markit source: Markit
Emirates NBD PMI New Orders
Non-Oil Private Sector Business Climate Indicators
Emirates NBD PMI Output Prices
6-Month Moving Average
6-Month Moving Average 6-Month Moving Average
Figure 1:
Purchasing Manager Index Composite
Figure 2:
Purchasing Manager Index Output
Figure 3:
Purchasing Manager Index New Orders
Figure 4:
Purchasing Manager Index Output Prices
50
52
54
56
58
60
62
64
11/13 11/14 11/15 11/16 11/17 11/18 11/19
54
56
58
60
62
64
66
68
70
11/13 11/14 11/15 11/16 11/17 11/18 11/19
48
52
56
60
64
68
72
11/13 11/14 11/15 11/16 11/17 11/18 11/19
46
48
50
52
54
56
11/13 11/14 11/15 11/16 11/17 11/18 11/19
Page 9
Saudi Economic Chartbook Fourth Quarter 2019
source: GASTAT source: GASTAT
CPI inflation, % yoy CPI inflation, % yoy
The negative CPI inflation has continued to ease
with -0.3%yoy in October after a trough at -2.2%
yoy in February. This can primarily be explained by a
vanishing pressure on housing rents during 2019.
Housing rents dominate the sub-index Housing,
water, electricity and are the single most important
item in the CPI (21%) . As a result, CPI inflation is
expected to turn positive by beginning of 2020.
source: GASTAT source: GASTAT
CPI inflation, sub-index Transport, % yoy
WPI inflation, % yoy
Consumer and Wholesale Price Inflation
CPI inflation, sub-index Furnishings, household equipment &
maintenance, % yoy
CPI inflation, sub-index Food and beverages, % yoy
CPI inflation, sub-index Housing, water, electricity, gas
and other fuels, % yoy
Figure 1:
Consumer Price Inflation All Items
Figure 2:
Consumer Price and Wholesale Price Inflation
Figure 3:
CPI Inflation Food & Housing
Figure 4:
CPI Inflation Furnishings & Transportation
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
10/13 10/14 10/15 10/16 10/17 10/18 10/19
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
10/14 10/15 10/16 10/17 10/18 10/19
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
10/14 10/15 10/16 10/17 10/18 10/19
-8.0
-4.0
0.0
4.0
8.0
12.0
16.0
20.0
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Page 10
Saudi Economic Chartbook Fourth Quarter 2019
source: MOJ, RC
The year 2019 has so far shown a considerable re-
covery of real estate activities. In Q3, the total
transaction value ascended by +72% compared to
the previous year, the number of transactions
picked up by +94%. This rebound has been more
pronounced in the residential area where the trans-
action value soared by +83% and the number of
transactions almost doubled (+99%).
source: MOJ, RC source: MOJ, RC
Total value of quarterly transactions, %yoy
Number of quarterly transactions, %yoy
Real Estate Market: Transaction Activity
Riyadh Region
Makkah Region
Eastern Region
All Other Regions
Total value of quarterly transactions, %yoy
Number of quarterly transactions, %yoy
source: MOJ, RC
Total value of quarterly transactions, %yoy
Number of quarterly transactions, %yoy
Figure 1:
Quarterly Real Estate Transactions Overall Country
Figure 3:
Quarterly Commercial Real Estate Transactions
Figure 4:
Breakdown of Transaction Value by Regions (Q3 2019)
Figure 2:
Quarterly Residential Real Estate Transactions
-50%
0%
50%
100%
150%
200%
Q3/12 Q3/13 Q3/14 Q3/15 Q3/16 Q3/17 Q3/18 Q3/19
-50%
0%
50%
100%
150%
200%
Q3/12 Q3/13 Q3/14 Q3/15 Q3/16 Q3/17 Q3/18 Q3/19
-100%
-50%
0%
50%
100%
150%
200%
Q3/12 Q3/13 Q3/14 Q3/15 Q3/16 Q3/17 Q3/18 Q3/19
45.2%
19.4%
12.1%
23.2%
Page 11
Saudi Economic Chartbook Fourth Quarter 2019
source: GASTAT source: GASTAT
Real estate land prices were little changed in Q3
2019 compared to the previous quarter with -0.7%
in the residential area and +0.1% in the commercial
segment. Compared to the previous year's period
they were only moderately lower (residential -3.7%,
commercial -1.2%). This underpins our view that
the Saudi real estate market is about to bottom out
and stabilize after a protracted decline since 2015.
source: GASTAT source: GASTAT
Residential villas price index
Residential price index Residential land price index
Commercial land price index Commercial price index
Real Estate Market: Price Indices
Residential apartments price index
Commercial centers price index
Commercial shops & galleries price index
Figure 1:
Residential and Commercial Price Indices
Figure 2:
Residential and Commercial Land Price Indices
Figure 3:
Residential Villas and Apartments Price Indices
Figure 4:
Commercial Shops and Centers Price Indices
70.0
75.0
80.0
85.0
90.0
95.0
100.0
105.0
Q3/14 Q3/15 Q3/16 Q3/17 Q3/18 Q3/19
70.0
75.0
80.0
85.0
90.0
95.0
100.0
105.0
Q3/14 Q3/15 Q3/16 Q3/17 Q3/18 Q3/19
80.0
85.0
90.0
95.0
100.0
105.0
Q3/14 Q3/15 Q3/16 Q3/17 Q3/18 Q3/19
80.0
85.0
90.0
95.0
100.0
105.0
Q3/14 Q3/15 Q3/16 Q3/17 Q3/18 Q3/19
Page 12
Saudi Economic Chartbook Fourth Quarter 2019
source: JODI source: JODI
Saudi Arabian crude oil production, in 1000 bd.
Saudi Arabian total oil refinery output, in 1000 bd.
Saudi crude oil production temporarily dropped to
9.1 mbd in September due to an outage caused by
the attacks on Aramco infrastructure during that
month. As a consequence, OPEC output declined to
a multi-year low at 29.1 mbd. On the other hand,
Saudi refinery output and exports were not affected
by these events. Meanwhile, oil prices recovered
above 60USD (Brent) in the course of November.
source: JODI, Bloomberg source: Bloomberg
Brent oil price OPEC crude oil production, in 1000 bd
WTI oil price
Oil Market Statistics: Production, Exports, Refinery and Prices
Saudi Arabian crude oil export, in 1000 bd. Saudi Arabian total oil refinery export, in 1000 bd.
Figure 1:
Saudi Crude Oil Production and Exports
Figure 2:
Saudi Crude Refinery Output and Exports
Figure 3:
OPEC Crude Output
Figure 4:
Oil Prices
6,500
7,000
7,500
8,000
8,500
9,000
9,500
10,000
10,500
11,000
11,500
09/13 09/14 09/15 09/16 09/17 09/18 09/19
0
500
1,000
1,500
2,000
2,500
3,000
3,500
09/13 09/14 09/15 09/16 09/17 09/18 09/19
29,000
30,000
31,000
32,000
33,000
34,000
09/12 09/13 09/14 09/15 09/16 09/17 09/18 09/19
20
30
40
50
60
70
80
90
11/15 11/16 11/17 11/18 11/19
Page 13
Saudi Economic Chartbook Fourth Quarter 2019
source: Bloomberg source: Bloomberg, JP Morgan
12-month forward exchange rate USD/SAR
The FX-forward premium for USD/SAR continues to
trade at historically low levels, illustrating the stable
macro framework of the Saudi economy at this
juncture. Meanwhile, the SAR effective exchange
rate gradually weakened from August to November,
following a moderate decline of the USD. From a
longer-term perspective, however, the SAR effec-
tive exchange rate is still trading at elevated levels.
source: Bloomberg source: Bloomberg, JPMorgan
SAR Real (CPI-adjusted) trade-weighted exchange rate index
SAR Nominal trade-weighted exchange rate index
Foreign Exchange: Forward Rates and Effective Exchange Rate Index
12-month forward exchange rate USD/SAR
SAR Nominal trade-weighted exchange rate index
SAR Real (CPI-adjusted) trade-weighted exchange rate index
Figure 1:
12-Months Forward Exchange Rate SAR/USD
Figure 2:
SAR Nominal and Real Effective Exchange Rate
Figure 3:
12-Months Forward Exchange Rate SAR/USD in the
Long Term
Figure 4:
SAR Nominal and Real Effective Exchange Rate in the
Long Term
3.73
3.75
3.77
3.79
3.81
3.83
3.85
11/15 11/16 11/17 11/18 11/19
104
108
112
116
120
124
128
11/15 11/16 11/17 11/18 11/19
3.65
3.67
3.69
3.71
3.73
3.75
3.77
3.79
3.81
3.83
3.85
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
80
90
100
110
120
130
140
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Page 14
Saudi Economic Chartbook Fourth Quarter 2019
source: Bloomberg source: Bloomberg
3-months SIBOR (Saudi Interbank Offered Rate)
5-year Swap rate SAR
In the second half of 2019, the Federal Reserve cut
its FED fund target rate so far three times from
2.50% to 1.75%. Accordingly, SAMA reduced the
official repo rate and the reverse repo rate each by
75bp to 2.25% resp. 1.75%. Against this back-
ground, USD and SAR interest rates across the en-
tire yield curve continued their decline which had
already started by end of last year.
source: Bloomberg source: Bloomberg
30-year maturity Reverse repo rate SAMA
5-year maturity 3-month SAIBOR (Saudi Interbank Offered Rate)
5-year Swap rate USD 3-months US LIBOR (London Interbank Offered Rate)
Interest Rates: Money Market, Capital Market and Central Bank Rates
3-month SAIBOR (Saudi Interbank Offered Rate)
3-month US LIBOR (London Interbank Offered Rate)
Figure 1:
3-Months SAIBOR vs. USD LIBOR
Figure 2:
5-Year Swap Rate SAR vs. USD
Figure 3:
KSA USD-Bonds Yield Spread to US Treasuries
Figure 4:
Central Bank Rate and 3-Months SAIBOR
10-year maturity
SAMA official repo rate
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
11/15 11/16 11/17 11/18 11/19
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
11/15 11/16 11/17 11/18 11/19
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
12/16 06/17 12/17 06/18 12/18 06/19
0.00
1.00
2.00
3.00
4.00
5.00
6.00
2004 2006 2008 2010 2012 2014 2016 2018
Page 15
Saudi Economic Chartbook Fourth Quarter 2019
source: SAMA source: SAMA
Current account balance, quarterly, in bln SAR Foreign workers’ remittances, quarterly, in bln SAR
(remittances outflow as part of Current account balance)
Foreign workers' remittances continued to decline
in 2019 as a result of the expat exodus in the last
years. They amounted to 56.1 bln SAR in H1 2019
vs. 64.3 bln SAR in H1 2018. Meanwhile, the lower
current account balance in Q2 was mitigated by a
sharply improved financial account balance which
ended in a balance of payment surplus and, hence,
an increase in foreign reserve assets of 50 bln SAR.
source: SAMA source: SAMA
Saudi Balance of Payments
Figure 1:
Current Account Balance
Figure 2:
Foreign Workers’ Remittances
Figure 3:
Financial Account Balance
Figure 4:
Contribution to Balance of Payments (in bln SAR)
Current account balance
Errors & omissions
Financial account balance
Net change in foreign
reserve assets
Financial account balance (excluding changes in foreign
reserve assets), quarterly, in bln SAR
(+ capital inflows, - capital outflows)
-100
-50
0
50
100
150
200
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2013 2014 2015 2016 2017 2018 2019
-40
-36
-32
-28
-24
-20
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2013 2014 2015 2016 2017 2018 2019
-125
-100
-75
-50
-25
0
25
50
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2013 2014 2015 2016 2017 2018 2019
-200
-150
-100
-50
0
50
100
150
200
-200
-150
-100
-50
0
50
100
150
200
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2013 2014 2015 2016 2017 2018 2019
Page 16
Saudi Economic Chartbook Fourth Quarter 2019
source: Bloomberg source: Tadawul
Tadawul All-share index Average daily traded value for Tadawul, in mln SAR
The Saudi equity market was subject to a notable
correction in the third quarter as investors started
to take profits after the strong market performance
due to the inclusion of Saudi equities in major EM
indices (MSCI, FTSE). After the end of the index in-
clusion period, trading volumes also considerably
declined with the average daily traded value drop-
ping below 3bln SAR in the last two months.
source: Tadawul source: Tadawul
Tadawul: Saudi Equity Market Statistics
10-Week Moving Average
Retail Foreign institutionals (Swap & QFI)
Domestic institutionals HNWI & IPI
Figure 1:
Tadawul All-Share Index
Figure 2:
Tadawul Average Daily Traded Value
Figure 3:
Weekly Net Purchase by Ownersip (in bln SAR)
Figure 4:
Weekly Net Purchase by Ownersip (in bln SAR)
40-Week Moving Average
-10
-8
-6
-4
-2
0
2
4
6
8
10
11/17 02/18 05/18 08/18 11/18 02/19 05/19 08/19 11/19
in bln SAR
-10
-8
-6
-4
-2
0
2
4
6
8
10
11/17 02/18 05/18 08/18 11/18 02/19 05/19 08/19 11/19
in bln SAR
5,000
5,500
6,000
6,500
7,000
7,500
8,000
8,500
9,000
9,500
10,000
11/15 11/16 11/17 11/18 11/19
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
11/15 11/16 11/17 11/18 11/19
Page 17
Saudi Economic Chartbook Fourth Quarter 2019
source: Bloomberg source: Bloomberg
TASI quarterly EPS in SAR, l.h.sc
Despite the correction phase in Q3, TASI still ex-
hibits a positive total return YTD by end of Novem-
ber (+3.9%). Amongst the major sectors, Banks
managed to outperform (+8.8%), while Materials
clearly underperformed the market (-5.9%). Corpo-
rate earnings continued to decline compared to the
previous year in the third quarter. This caused the
valuation for TASI to remain at elevated levels.
source: Bloomberg source: Bloomberg
PE ratio TASI, 12-month trailing earnings
Long-term average
TASI 4Q trailing EPS in SAR, r.h.sc.
PE ratio TASI, 12-month forward earnings
Long-term average
Tadawul: Saudi Equity Market Statistics
Figure 1:
Performance TASI Sectors November 2019YTD
Figure 2:
Quarterly Earnings TASI
Figure 3:
Valuation TASI: PE-Ratio Trailing
Figure 4:
Valuation TASI: PE-Ratio Forward
Performance in % YTD, including dividends
250
300
350
400
450
500
550
0
25
50
75
100
125
150
Q3/11 Q3/12 Q3/13 Q3/14 Q3/15 Q3/16 Q3/17 Q3/18 Q3/19
8
10
12
14
16
18
20
22
24
26
11/09 11/11 11/13 11/15 11/17 11/19
6
8
10
12
14
16
18
11/09 11/11 11/13 11/15 11/17 11/19
-22.2
-13.7
-10.2
-10.0
-8.9
-5.9
-5.9
0.0
0.2
3.9
5.0
6.9
8.1
8.8
9.0
13.0
13.9
15.6
19.9
20.2
36.4
-30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0
Media
Consumer Durables & App.
Pharma, Bio & LS
Diversified Financials
Real Estate
Materials
Healthcare Equip&Svc
Capital Goods
Insurance
TASI
Food & Beverages
Food & Staples Retailing
Retailing
Banks
Commercial & Prof. Svc
REITS
Telco Services
Energy
Consumer Services
Transportation
Utilities
Page 18
Saudi Economic Chartbook Fourth Quarter 2019
Saudi Economic Outlook
Oil, Inflation and Interest Rates GDP and Fiscal Indicators
source: GASTAT, SAMA, RC source: GASTAT, SAMA, Bloomberg, RC
The Saudi economy exhibits a distinct growth diver-
gence between the oil sector and the non-oil sector
economy in 2019. As a result, growth of the overall
economy will turn out to be subdued for this year.
The non-oil private sector continues to gain pace
since the beginning of this year, which has caused us
to upgrade our growth outlook for this part of the
economy from 2.4% to 2.9% in 2019 and from 2.7%
to 3.2% in 2020.
On the other hand, oil sector GDP growth has been
downgraded from -1.2% to -3.2% for this year as a
consequence of a notable oil output reduction in the
course of 2019. For next year, we expect a gradual
recovery by +1.9%.
As a result, the overall economy will expand by 0.1%
this year and by 2.4% in 2020.
Our revised crude output estimates also imply lower
petroleum exports which affects the trade balance
and the current account balance accordingly. Howev-
er, our new export projections still translate into a
strong current account surplus of 4.6% of GDP in
2019 and 4.4% in 2020.
The average Brent oil price is expected to be gradu-
ally lower next year on the back of a potentially over-
supplied global market in H1 2020.
Average CPI inflation for 2019 is forecasted at -1.2%.
We expect the Saudi inflation rate to turn positive at
the beginning of 2020 and forecast an average infla-
tion rate of 1.4% for next year.
In particular, we expect the decline of housing rents
as the major driver for the current CPI deflation to
fade in 2020 on the back of an anticipated stabiliza-
tion of the Saudi residential real estate market.
SAIBOR rates have considerably declined throughout
2019 on the back of three rate cuts by the FED and by
SAMA. We expect one final rate cut in 2020 and fore-
cast 3M SAIBOR to drop below 2.0% in the course of
next year.
We forecast the unemployment rate for Saudi na-
tionals to decline to 12.1% in 2020. Combined with
an expected increase of the Saudi labor force partici-
pation rate to 43.1%, this implies that the Saudi
economy will create approximately 170k-190k new
jobs for Saudis in the year 2020.
Facts and Forecasts at a Glance
2017 2018 2019f 2020f
Real GDP Growth
Overall economy -0.7 2.4 0.1 2.4
Non-oil Private sector 1.5 1.9 2.9 3.2
Government sector 0.7 2.9 2.0 1.6
Oil sector -3.1 3.1 -3.2 1.9
Fiscal Balance and Government Debt
Fiscal Balance in bln SAR -238 -174 -154 -191
Fiscal Balance in % GDP -9.2 -5.9 -5.5 -6.6
Government debt in bln SAR 443 560 690 815
Government debt as % GDP 17.2 19.0 24.4 28.2
Trade and Current Account
Trade Balance in bln SAR 369 639 485 474
Trade Balance in % GDP 14.3 21.7 17.2 16.4
Current Account in bln SAR 39 271 129 127
Current Account in % GDP 1.5 9.2 4.6 4.4
2017 2018 2019f 2020f
Oil Prices and Production (yearly average)
Brent price (USD pb) 54.8 71.7 65.0 64.0
WTI price (USD pb) 50.9 64.9 56.0 57.0
OPEC Basket price (USD pb) 52.4 69.8 64.0 63.0
KSA oil production (mln bd) 9.9 10.3 9.7 9.8
Inflation and Interest Rates (year end)
CPI Inflation (yearly average) -0.84 2.47 -1.20 1.40
3M SAIBOR SAR 1.90 2.98 2.15 1.85
Reverse Repo Rate 1.50 2.50 1.75 1.50
Official Repo Rate 2.00 3.00 2.25 2.00
Labor Market (yearly average)
Unemployment rate total in % 5.9 6.0 5.9 5.8
Unemployment rate Saudi in % 12.8 12.8 12.4 12.1
Labor force part. total in % 54.9 56.0 56.2 56.5
Labor force part. Saudi in % 40.8 42.0 42.5 43.1
Page 19
Saudi Economic Chartbook Fourth Quarter 2019
Disclaimer
The information in this report was compiled in good faith from various public sources believed to be reliable.
Whilst all reasonable care has been taken to ensure that the facts stated in this report are accurate and that the
forecasts, opinions and expectations contained herein are fair and reasonable, Riyad Capital makes no represen-
tations or warranties whatsoever as to the accuracy of the data and information provided and, in particular, Riyad
Capital does not represent that the information in this report is complete or free from any error. This report is not,
and is not to be construed as, an offer to sell or solicitation of an offer to buy any financial securities. Accordingly,
no reliance should be placed on the accuracy, fairness or completeness of the information contained in this re-
port. Riyad Capital accepts no liability whatsoever for any loss arising from any use of this report or its contents,
and neither Riyad Capital nor any of its respective directors, officers or employees, shall be in any way responsible
for the contents hereof. Riyad Capital or its employees or any of its affiliates may have a financial interest in secu-
rities or other assets referred to in this report.
Opinions, forecasts or projections contained in this report represent Riyad Capital's current opinions or judgment
as at the date of this report only and are therefore subject to change without notice. There can be no assurance
that future results or events will be consistent with any such opinions, forecasts or projections which represent
only one possible outcome. Further such opinions, forecasts or projections are subject to certain risks, uncertain-
ties and assumptions that have not been verified and future actual results or events could differ materially.
The value of, or income from, any investments referred to in this report may fluctuate and/or be affected by
changes. Past performance is not necessarily an indicative of future performance. Accordingly, investors may
receive back less than originally invested amount.
This report provide information of a general nature and do not address the circumstances, objectives, and risk
tolerance of any particular investor. Therefore, it is not intended to provide personal investment advice and does
not take into account the reader’s financial situation or any specific investment objectives or particular needs
which the reader’s may have. Before making an investment decision the reader should seek advice from an inde-
pendent financial, legal, tax and/or other required advisers.
This research report might not be reproduced, nor distributed in whole or in part, and all information; opinions,
forecasts and projections contained in it are protected by the copyright rules and regulations.
Riyad Capital is a Saudi Closed Joint Stock Company with a paid up capital of SR 200 million , with commercial regis-
tration number (1010239234), licensed and organized by the Capital Market Authority under License No. (07070-
37), Head Office: Granada Business Park 2414 Al-Shohda Dist. – Unit No 69, Riyadh 13241 - 7279 Saudi Arabia.
Website: www.riyadcapital.com