country analysis quarterly monitor gcc saudi arabia q3 2013

7/29/2019 Country Analysis Quarterly Monitor Gcc Saudi Arabia q3 2013

1/19

Q32013

QuarterlyOutlook

KSA


2/19

FranciscoQuintanaSeniorEconomist

[email protected]

CamilleAccadResearchAnalyst

[email protected]

DanaAlFakirResearchAnalyst

[email protected]

KarmenMenesesAdministrativeAssistant

[email protected]

IMPORTANT DISCLAIMER: The information contained in this report is prepared by the Research Department of Asiya Investments and is believed to be reliable, but its accuracy and completeness

are not warranted. Opinions, estimates, and investment strategies and views expressed herein are: 1) based on current market prices, data, and conditions; 2) subject to change without notice;

and 3) may differ from the opinions expressed for other purposes or in other contexts by other areas of Asiya. Asiya does and seeks to do business in countries covered in its research reports;

hence, investors should be aware of potential conflicts of interests that could affect the reports objectivity. Research recommendations do not constitute financial advice nor extend offers to

participate in any specific investment on any particular terms. Investors should consider this material as only a single factor in making their decisions.

Everymonth,weprovide:

1) Macroeconomicoutlook.

2) Analysisof

all

countries

in

Asia

and

GCC,

andsomekeyindustrializedeconomies.

3) Tradingdevelopmentsonallmajor

commodities.

www.asiyainvestments.com

2

AsiyaResearchataglance

KSAQuarterlyOutlook Q32013


3/19

3

SaudiArabia:GDPpoisedtocontinuetoeasethisyear

1. Economy: in early contraction.

Growth: witnessed its slowest expansion since Q1 2011, in Q1 2013, comingin at a mere 2.1% yearonyear on lower oil output. Growth is expected tobe lackluster until years end on waning oil demand. But a mild pick up isforecasted for next year.

Consumption: consumer credit loans slipped slightly recently, butshould pick up on higher loan growth in the real estate sector due torising rents.

Government: spending will continue to rise as the government strivesto boost publicsector employment, capital spending on hospitals,school, transport infrastructure and 500,000 new affordable housingunits.

Inflation: picked up slightly in July, due to a spike in food prices during theHoly month of Ramadan. However it should steady due to the subsidies on arange of basic goods and as commodity prices remain subdued. Higher

inflationary pressures may arise if the pace of construction of affordablehousing does not increase.

Labor market: as the unemployment rate remains high among youngSaudis, the government continues to push for a higher quota of Saudiemployees in the private sector. But due to a backlash from the privatesector, the government appears to be easing its Saudization measuresslightly.

2. Risks: slowing global economy, social unrest, and falling oil prices.

Lower oil output due to sluggish global demand amid a fragile globalrecovery.

Political instability due to youth unemployment. Sectarian unrest. Spillovereffects from conflicts in Egypt and Syria.

Saudization of the labour force is gradually increasing the cost of firms,although the impact has not been large yet.

Inflation could jump on rising demand and salaries (however the externalfactors and subsidies should help keep a cap on prices).

.Source: IMF,ConsensusForecastsandAsiyaforecasts.


Indicator 2011 2012e 2013f 2014f

GDP(NominalSAR,mn) 2,511 2,697 2,793 2,885

GDP(YoY) 8.5 6.2 3.2 4.4

Oil GDP(YoY) 10.4 5.5 2.8 3.4

NonoilGDP(YoY) 8.1 5.0 4.2 5.1

Exports(YoY) 8.7 5.0 0.2 3.5

Imports(YoY) 9.6 4.2 4.0 6.6

Inflation 5.0 3.4 4.0 4.1

M2(YoY) 15.4 13.6 6.5 7.2

BudgetBalance(%GDP) 12.0 14.6 9.0 6.0

CurrentAccount(%GDP) 12.7 15.9 11.5 10.1

UnemploymentRate 5.8 5.5 5.3 5.3

ExternalDebt(%GDP) 13.0 11.7 11.2 10.6

ExchangeRate(SAR:USD) 3.8 3.8 3.8 3.8

FinancialSector(creditgrowth) 10.7 10.0 8.0 7.0


4/19

4

Growthslips

SaudiArabia:oilrevenuesfallamidslowingglobaldemand


20

10

0

10

20

30

40

2005

2006

2007

2008

2009

2010

2011

2012

SA:GDPGrowth

GDPgrowth

%chg, YoY

Since2001

10

5

0

5

10

15

20

2005

2006

2007

2008

2009

2010

2011

2012

SA:ContributiontoGrowth

OilSector

NonoilSector

%pt,YoY

Since 2001

onweakeroildemand.

Source:AsiyaResearchonDataStream,2013 Source:AsiyaResearchonDataStream,2013


5/19

5

Growthdrivenbynetexports.

SaudiArabia:exportsdriveGDPgrowth


2

0

2

4

6

8

10

2006

2007

2008

2009

2010

2011

2012

SA:ContributiontorealGDP

Agriculture Industry

Services RealGDPGrowth(rhs)

%pt %chg,YoYSince2006

Industry takesahit.


30

20

10

0

10

20

30

40

2005

2006

2007

2008

2009

2010

2011

2012

SA:ContributiontoNominalGDP

Government Consumption

Exports Imports

Investments GDPGrowth(rhs)

%ppt %chg,YoYSince2005


6/19

6

Dieselproductionincreased,butfueloileased.

SaudiArabia:oilproductiongrowthstillcontracting


0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

SA:Production

Asphalt CrudeOil Diesel FuelOil

barrels Since2002

15

10

5

0

5

10

15

20

0

2,000

4,000

6,000

8,000

10,000

12,000

Apr

11

Jun

11

Aug

11

Oct

11

Dec

11

Fe

b

12

Apr

12

Jun

12

Aug

12

Oct

12

Dec

12

Fe

b

13

Apr

13

SA:CrudeOilProduction

PerDay YoYGrowth(rhs)

barrels %chg,YoYSince2010

Oilproductiongrowth sawaslightuptickinQ2.



7/19

7

Exportscontractedamidpoorglobaldemand.

SaudiArabia:exportgrowthdeclines,mayriseonhigheroilprices


5,000

0

5,000

10,000

15,000

20,000

25,000

20

0

20

40

60

80

100

Mar

11

May

11

Jul11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul12

Sep

12

Nov

12

Jan

13

Mar

13

SA:ForeignTradeTrade

Balance

(rhs)

Exports

Imports

%chg,YoYUSDmn

Since2011

30

40

50

60

70

80

90

100

110

120

0

50

100

150

200

250

May

11

Jul11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

SA:Exportsvs CrudeOilPrices

ExportUnit

Value

WTICrude

Oil

Prices(rhs)

1973=100

Since2011 USD/barrel

Exportvalues&oilpricessteadiedinQ2.



8/19

8

Demanddisappointsacrosstheboard.

SaudiArabia:exportslacklusteracrosstheboard


6 4 2 0 2 4 6

US

NIE

Japan

EU

Other

ASEAN

MiddleEast

China

India

SA:ContributiontoExports

Apr13

Mar13

5yrsaverage

AsofApril,2013

2.00 0.00 2.00 4.00 6.00 8.00 10.00

Japan

ASEAN

MiddleEast

US

NIE

China

India

EU

SA:ContributiontoImports

Apr13

Mar13

5yraverage

%pt,YoY

AsofApril,2013

EUleadingcontributortoimports.

Source:Asiya

Research

on

DataStream,

2013 Source:

Asiya

Research

on

DataStream,

2013


9/19

9

Saudiunemploymentremainshigh,prompting

theimplementationofstringentSaudization

measures.

KSA:unemploymentstillanissue,yetSaudihasbeguntakingastepback

from

its

bold

Saudization

measures

QuarterlyEconomicOutlook Q22013

Source:AsiyaResearchonDataStream,2013.

0

2

4

6

8

10

12

14

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

SA:Unemploymentbynationality

Total Saudis NonSaudis

% Since2002

Atthe

beginning

of

July,

the

government

announced

thatcontractingcompaniescanincludethecostofthe

recentlyimposedexpatriatelevyintotheirbidsfor

futurepublicsectorprojects.Thiscomesafterthe

companiesvoicedtheirconcernsovertheimpactthe

levyishavingontheirprofitmargins.

Theannouncementcomessoonafterthegovernment

extendedtheamnestyonincorrectvisasuntilearly

Novemberthisyear.

10

5

0

5

10

15

2004

2005

2006

2007

2008

2009

2010

2011

SA:Laborforce

LaborForcegrowth

Populationgrowth

%chg,YoY Since 2004

Signs of a pull back on the Saudization front:

Laborforcegrowthshootsuppast10%in2011.


10/19

10

InflationpickedupslightlyinJulyduetoriseinfood

pricesasaresultofHolymonthofRamadan.

SaudiArabia:inflationexpectedtosteady


0 0.5 1 1.5 2 2.5

Education

Furnishing

Transport

Clothing

Other

Housing

Food

SA:Contributiontoinflation

Q32012

Q22012

5yearAverage

% pt

Asof Q312

Food&housingstableandbelowtrend.

Source:Asiya

Research

on

DataStream

&

SAMA,

2013. Source:

Asiya

Research

on

DataStream,

2013.

Education

5%

Clothing

15%

Food

35%Furnishing

7%

Other

8%

Housing

15%

Transport

15%

SA:CPIbasket

0

2

4

6

8

Jun1

1

Sep1

1

Dec1

1

Mar1

2

Jun1

2

Sep1

2

Dec1

2

Mar1

3

Jun1

3

Sep1

3

Dec1

3

Mar1

4

SA:InflationAnnual

Inflation

%chg,YoYSince 2011

Further notes on inflation

Thereis

apotential

risk

of

inflation

witnessing

an

uptick

next

year,

iftheaffordablehousingprojectdoesnotpickupinpace.


11/19

11

SaudiArabia:creditgrowthslipsslightly,butinvestorconfidencerecovers


Source:Asiya

Research

IFO

World

Economic

Survey,

2013.

Source:AsiyaResearchonSAMA,2013.

Creditgrowthwitnessesmarginalease.Investorconfidencesettomakeacomebackonthe

backofsomeeconomicsignsofrecoveryintheUS.

0

1

2

3

4

5

6

7

8

9

May

06

Nov

06

May

07

Nov

07

May

08

Nov

08

May

09

Nov

09

May

10

Nov

10

May

11

Nov

11

May

12

Nov

12

May

13

SA:InvestorconfidenceInvestor

Confidence

(Next

6Months)

InvestorConfidence(current)

Since2006

0

2

4

6

8

10

12

Sep

10

Nov

10

Jan

11

Mar

11

May

11

Jul11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

SA:Consumercreditgrowth

YoYGrowth 5yearaverage

%chg,YoY

Since2010

Further notes on consumer credit

Consumerlending,

with

the

exception

of

credit

cards,

grew

by

astaggering

23%

yearonyearin1H2013.

Household goods outlook

In April this year, the King voiced frustrations over the slow progression of the

500,000 unit housing development. To hasten it, he has ordered that the

Ministry of Municipal and Rural Affairs hand over the municipal lands to the

Ministry of Housing. However, projects rate of progression remains weak.

As a result, demand for household goods (home appliances, consumer

electronics, furniture, etc.) is expected to increase at least by next year.

Home furniture grew by 0.8% monthonmonth in July and by 5.5% yearon

year, higher than the 2.8% in the previous month.


12/19

12

Realestateisstillasmallchunkoftotalcredit

KSA:risingrentspropupcreditgrowthinrealestate


butisthefastestgrowing.

Source:Asiya

Research

on

DataStream,

2013. Source:

Asiya

Research

on

DataStream,

2013.

0

500

1,000

1,500

2,000

2,500

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

SA:Consumer&CreditCardLoans

RealEstateFinance Cars&Equipment

Others

Riyals,billionSince2010

0

5

10

15

20

25

30

35

Dec

11

Fe

b

12

Apr

12

Jun

12

Aug

12

Oct

12

Dec

12

Fe

b

13

Apr

13

Jun

13

SA:Consumer&creditcardloansgrowth

RealEstateFinance Cars&Equipment

Others

%chg,YoY Since2011


13/19

13

Broadmoneysupplytrekkingupwards.

SaudiArabia:broadmoneygrowthedgesup


0

5

10

15

20

25

30

Jul11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Jul13

SA:MoneySupplyGrowth

M1 M2

%chg,YoYSince2011

0.0

0.2

0.4

0.6

0.8

1.0

1.2

Jun

11

Aug

11

Oct

11

Dec

11

Fe

b

12

Apr

12

Jun

12

Aug

12

Oct

12

Dec

12

Fe

b

13

Apr

13

Jun

13

SA:InterestRate

3MoAvgInterbankRate 3yearAverage

%Since2011

InterbankratesteadiesaboveLTaverage.

Source:Asiya

Research

on

DataStream,

2013 Source:

Asiya

Research

on

DataStream,

2013


14/19

14

Tradedepositsrecovers.

KSA:investmentsfromoilproceedsindecline


80

60

40

20

0

20

40

Jul11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Jul13

SA:TradeDeposits

Depositsfor

Letter

of

Credit

YoYGrowth

SARbn,%

Since2011

24

12

0

12

24

36

48

60

10

5

0

5

10

15

20

25

Jul11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Jul13

SA:InvestmentAbroad

Inv.inForeignSecurities

Depositsw

banks

abroad

(rhs)

%chg,YoY

Since2011

%chg,YoY

Depositsabroadremainincontraction.

Source:Asiya

Research

on

DataStream,

2013 Source:

Asiya

Research

on

DataStream,

2013


15/19

15

Investmentinforeignsecuritiesrises

SaudiArabia:reservesgrowthontherise


0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Jul11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Jul13

SA:CentralBankBalanceSheet

Depositswbanksabroad Gold

Inv.inForeignSecurities Cash

Other

SAR

Since2011

2,100,000

2,150,000

2,200,000

2,250,000

2,300,000

2,350,000

2,400,000

2,450,000

2,500,000

2,550,000

2,600,000

2,650,000

Jul12

Aug

12

Sep

12

Oct

12

Nov

12

Dec

12

Jan

13

Fe

b

13

Mar

13

Apr

13

May

13

Jun

13

Jul13

SA:InternationalReservesUSDmnSince2012

andsodoesinternationalreserves.

Source:Asiya

Research

on

DataStream,

2013 Source:

Asiya

Research

on

DataStream,

2013


16/19

16

Timedepositsrecoverslightly.

SaudiArabia:savingsgrowthontherise


25

20

15

10

5

0

5

10

15

270,000

280,000

290,000

300,000

310,000

320,000

330,000

340,000

350,000

Jul11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Jul13

SA:TimeDeposits

TimeDeposits

YoYGrowth(rhs)

SAR %chg,YoYSince2011

0

5

10

15

20

25

300,000

400,000

500,000

600,000

700,000

800,000

900,000

Jul11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Jul13

SA:DemandDeposits

DemandDeposits

YoYGrowth(rhs)

SAR %chg,YoYSince2011

Growthindemanddepositscontinuestoascend.

Source:Asiya

Research

on

DataStream,

2013 Source:

Asiya

Research

on

DataStream,

2013


17/19

17

SARpeggedtoUSD

KSA:appreciationintradeweightedterms


3.740

3.745

3.750

3.755

3.760

Jul11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Jul13

SA:ForeignExchange

USD:SAD

perUSDSince2o11

80

85

90

95

100

105

110

Jul11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Jul13

SA:ForeignExchange

REER

1970=50 Since2011

appreciationagainstothercurrencies.

Source:AsiyaResearchonDataStream,2013

Note:TheREERisderivedfromtheTradeWeightedUSDIndex,and

calculatedas

aweighted

average

of

the

price

of

various

currencies

relativetotheUSD.

Source:AsiyaResearchonDataStream,2013

Appreciation Appreciation


18/19

18

Marketperformance backonupwardtrend.

KSA:marketperformanceontherise


10

0

10

20

30

40

50

60

5,600

6,100

6,600

7,100

7,600

Aug

11

Oct

11

Dec

11

Fe

b

12

Apr

12

Jun

12

Aug

12

Oct

12

Dec

12

Fe

b

13

Apr

13

Jun

13

Aug

13

SA:FinancialMarkets

Index YoYChange(rhs)

1998=1000 %chg,YoY

Since2011

20 0

20

40

60

80

100

120

Media

Insurance

Energy

Petrochem

Industrials

Financials

MultiInv.

Construction

Transport

Telecom

Cement

Food

RealEstate

Retail

Tourism

SA:MarketReturnbySector

%YoY

AsofAugust2013

Tourismandretailleadingsectors.

Source:Asiya

Research

on

DataStream,

2013 Source:

Asiya

Research

on

DataStream,

2013


19/19

19

AsiyaResearch AsiyaInvestments

KIPCOTower,floor31

KhalidBinAlWaleedStreet,Sharq

Kuwait

Tel:+965

2297

1300

Fax:+96522971310

@AsiyaInvest

[email protected]

www.asiyainvestments.com

AsiyaResearch ContactInformation

IMPORTANT DISCLAIMER: The information contained in this report is prepared by the Research Department of Asiya Investments and is believed to be reliable, but its accuracy and completeness

are not warranted. Opinions, estimates, and investment strategies and views expressed herein are: 1) based on current market prices, data, and conditions; 2) subject to change without notice;

and 3) may differ from the opinions expressed for other purposes or in other contexts by other areas of Asiya. Asiya does and seeks to do business in countries covered in its research reports;

hence, investors should be aware of potential conflicts of interests that could affect the reports objectivity. Research recommendations do not constitute financial advice nor extend offers to

participate in any specific investment on any particular terms. Investors should consider this material as only a single factor in making their decisions.


country analysis quarterly monitor gcc saudi arabia q3 2013

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