18/05/2009
The total private sector imports funded by commercial banks through the appropriation of securities under collection increased after the private sector posted its largest decline this year. Last February such imports reached 10 billion riyals and last March they reached 14.1 billion riyals. The increase, according to recent data issued by the Saudi Arabian Monetary Agency (SAMA,) is due to the high volume of car financing, a sector which has seen a significant decline in global sales because of the global financial crisis. But the irony lies in the fact that financing in this sector jumped from 1.8 to 2.56 billion riyals the highest rate so far this year. The total amount of financing in this sector in 2008 amounted to 25.7 billion riyals.
In second place is the foodstuff sector including cereals, fruits and vegetables, livestock and meat. This sector jumped from 816 million riyals invested to 1.5 billion riyals, the highest level this year.
Observers saw a significant increase in the financing of grain, rising from 287 to 518 million riyals. The volume of financing for machinery went up from 833 million riyals to 1.4 billion riyals. The 2008 figures indicate an obvious decline due to the global financial crisis, which has begun to effect the Saudi economy. Since last November the financing through commercial banks dropped by 4 billion riyals from 19 billion riyals to 15 billion riyals.
However, 2008 saw the largest ever rise in the volume of financing due to significant price increases that resulted from a rise in demand. Financing in 2008 amounted to 212 billion riyals, compared to 168 billion riyals in 2007.
An advisor to a Saudi bank (who preferred to remain anonymous) said that the demand for imports are usually affected by two important factors: price and quantity both of which have declined significantly in Saudi Arabia and will be reflected in documentary credits for sure.
Mohamed Imran, a member of the Saudi Economic Society, said "The figures indicate the existence of a large demand for cars as evidenced by the size of the amounts of credit opened for them. This contradicts the current decline in the demand for cars in the Saudi market." He added "After the crisis began car prices went down which should result in lower product prices for consumers."
