SAMA remains vigilant to possible risks; growth likely to continue in 2023: Al-Sayari

Saudi Central Bank headquarters

The Saudi economy will maintain growth this year, backed by the Saudi Vision 2030 initiatives and the Kingdom’s solid financial system, Ayman Al-Sayari, Governor of the Saudi Central Bank (SAMA), said.

Discussing SAMA’s financial stability report for 2023, Al-Sayari said SAMA remains vigilant to possible risks and will continue to monitor both global and domestic developments to maintain the stability and resilience of the financial system.

Saudi Arabia’s economy is expected to grow at a slower pace of 3.1% in 2023, after the real gross domestic product (GDP) expanded by 8.7% in 2022, driven by oil activities.
 

This is primarily attributed to the slower growth of the oil sector in line with the OPEC+ agreement, said the central bank. 

It expected the strong and sustainable levels of growth in non-oil GDP to continue, backed by the ongoing recovery in the tourism sector and the progress made in implementing initiatives related to Vision 2030, such as privatization programs, support for local content, increase in non-oil exports, and the continued local spending by the Public Investment Fund. 

SAMA forecasts in its report that the inflation rate will ease in the Kingdom during 2023, as stability of commodity and food prices globally, in addition to the rise in the US dollar will likely curb upward pressure on imported goods in the Kingdom. It also expected that factors such as the increase in domestic tourism activities, rise in the rate of expatriates, the improvement in the labor market will lead to stronger domestic demand and increased consumption. 

The central bank said that it expects the growth of the banking sector assets to continue, after rising by about 10.5% in 2022, driven by the expected demand for loans from the corporate segment. 

The rate of non-performing loans remained low despite concerns arising from hikes in interest rates, as it inched lower to 1.8% in 2022, compared to 1.9%, with a coverage ratio of 146.5%, it added. 

SAMA attributed the decline in NPLs to the resilience of local banks and their adherence to high credit standards, noting that most of the bank lending was in the form of fixed-interest loans, which limits the occurrence of risks such as the risks of high interest rates.