JEDDAH: Saudi imports are expected to fall by nearly 12 percent in 2009 to $89 billion, down from a record high last year when it was $100.6 billion, according to a report released on Thursday by a team of economists at Banque Saudi Fransi. This would mark the steepest year-to-year decline in imports since 1994.

Citing lackluster consumer demand and risk aversion by importers, the report also said tourism will be down by as much as 15 percent this year thanks to the global recession and swine flu concerns.

Expenditures are expected to drop too, with the nonoil private sector likely to witness U-shaped recovery in 2010.

Meanwhile, credit growth is set to pick up pace led by financing to public-private partnerships. Inflation is also expected to decline. “We expect inflation of 5.1 percent this year and 4.6 percent in 2010,” says the study, which was authored by BSF’s Chief Economist John Sfakianakis, research analyst Turki A. Al Hugail and analyst Daliah Merzaban.

The study related to inflation substantiates Saudi Arabian Monetary Agency’s (SAMA) forecast of an inflationary trend published in the media.

“While confidence and stability are showing signs of gradually returning to the Saudi economy, the latest import data provide us with evidence that the pace of growth and appetite for risk will be measured at best,” the study said.

“While exports fall and imports wane, we expect the Kingdom to pull off a small current account surplus of SR12.8 billion this year, its smallest in a decade. For 2010, we are optimistic but guarded about an economic recovery in the world’s largest oil exporter as a result of the most recent data on private sector credit, which point to a cautious, subdued improvement in the nonoil economy in the coming quarters. A full-fledged business cycle recovery is inexorably tied to a takeoff in credit, which will take time,” the study said.

Next year’s private sector recovery is likely to take a more prolonged, U-shaped route, not a V-shaped recovery that will see the businesses rebound in as quickly as one quarter. This is positive considering evidence that the United States faces a more protracted economic recovery fraught with unemployment, while risks for the creation of a global asset price bubble are becoming more pronounced.

According to the study, Saudi Arabia’s banking sector continues to experience weak credit growth, but banks have enough liquidity, making them better placed than some of their Gulf counterparts to restart lending once confidence returns.