The recent increase in Saudi bank deposits could help sustain strong lending growth, albeit at a slower pace than in recent years, according to a senior economist.
Speaking to Asharq, Naif Al-Ghaith, chief economist at Riyad Bank, said credit growth in the Kingdom slowed to 8 percent in March, compared with earlier peaks of 16 percent and 18 percent. Despite this, he stressed that the 8.7 percent deposit growth is providing banks with greater liquidity.
He also noted that credit quality remains high despite the repercussions of the Iran war, as reflected in a decline in the non-performing loan ratio across the banking system.
Al-Ghaith’s remarks came in response to a recent report by S&P Global, which forecast a slowdown in loan growth among Saudi banks amid a reprioritization of financing linked to Vision 2030 projects.
Debt issuances in Saudi Arabia
The agency warned that a decline in foreign investors’ risk appetite could pressure banks’ ability to attract external financing, which has played an increasingly important role in recent years in bridging the gap between loans and deposits.
However, Al-Ghaith said the expected slowdown in issuance would not come as a surprise to Saudi banks, adding: “One of the tools to bridge the gap between deposits and loans is issuing bonds, whether locally or internationally.”
The economist further said: “Therefore, we expect issuance to continue. The volume of issuances will not be the same as in previous periods, as we are seeing growth in deposits, both demand deposits, which increased by 3 percent, and time and savings deposits, which rose by 16 percent, narrowing the gap between loans and deposits.”
The government had already secured more than 90 percent of its budget financing needs for this year during the first quarter, moving ahead of risks stemming from the Iran war, according to the National Debt Management Center earlier this month.
