Annual growth in Saudi Arabia's money supply slowed in November to its lowest level in at least a year, official data showed on Saturday, despite bold moves to inject cash into the banking system to keep the economy growing.
The annual growth of M3, the broadest measure of money circulating in the economy, slowed to 19.2 percent in November from 20.2 percent in October, according to data published on the website of the Saudi Arabian Monetary Agency (SAMA).
M3 rose to 919.3 billion riyals ($245.1 billion) by end-November, compared with 771 billion riyals a year earlier, the SAMA data showed. Annual growth in money supply was 19.4 percent in September and 21.8 percent in August. Analysts had widely been expecting money supply growth to pick up pace in November after SAMA engaged in an aggressive rate cut policy.
"There is a slowdown in the private sector and this partly reflects on the credit growth," said John Sfakianakis, chief economist at SABB bank, HSBC's Saudi subsidiary. On October 12, SAMA reduced the repo rate by 50 basis points to 5 percent and also lowered reserve requirements to 10 percent from 13 percent, a move that was expected to release about 10 billion riyals to commercial banks.
Nine days later SAMA poured $3 billion in deposits into the banking system to ease liquidity pressures. It was SAMA's first injection of US dollars in a decade. SAMA again cut the repo rate twice after October 12 to 3 percent and cut reserve requirements to 7 percent. "The decline in money supply's growth shows the credit challenges in the banking system. Banks are not lending at the same rate of two quarter ago because deposit growth has not been commensurate to lending growth," Sfakianakis said.
Money supply growth is an indicator of future inflation, which in Saudi eased to 9.5 percent in November from 10.9 percent in August. The central bank's net foreign assets stood at 1.66 trillion riyals at the end of November, the central bank said. That compared with 1.65 trillion riyals at the end of October.