The Saudi Central Bank (SAMA) has issued its 57th Annual Report. The Report reviews key economic and financial developments in the Kingdom of Saudi Arabia during the year 1441H/1442H (2020). The Report covers monetary and banking developments. It also highlights the latest developments of the external sector, public finance, and oil and non-oil economic sectors, as well as the developments of the activities of insurance, finance and capital market. In addition, it provides time series data for various economic and financial activities and sectors.
The Report also touched on the extraordinary circumstances witnessed worldwide in 2020 and challenges facing the world at all fronts, as the COVID-19 pandemic has cast a shadow on the global economy. As part of the global economic ecosystem, the Saudi economy contracted by 4.1 percent in 2020. This was mainly attributable to a contraction of 6.7 percent in the oil sector due to oil production cut by Saudi Arabia according to the OPEC+ agreement to cut production in order to achieve stability in the oil market, coupled with waning global demand on energy products as a result of the pandemic. Moreover, non-oil sector also contracted by 2.3 percent due to the implementation of precautionary measures aimed at mitigating the coronavirus outbreak, thereby impacting most main economic activities at various degrees. Nevertheless, the Saudi economy showed its remarkable resilience in weathering these repercussions. The Saudi government was able to prudently and sensibly curtail the impacts of the pandemic and its implications, setting an example to the world on how to coordinate efforts among various government agencies in the face of the pandemic.
In this regard, H.E. SAMA Governor, Dr. Fahad A. Al-Mubarak, has emphasized that the Saudi economy has witnessed numerous reforms that have helped shift the structure of the economy, moving it towards more diversification and enabling it to better leverage the relative advantages enjoyed by Saudi Arabia whether at the level of natural resources, geographical location, human capabilities, or the infrastructure including the technology infrastructure. H.E. Dr. Al-Mubarak also stated that these reforms, alongside stimulus packages and unprecedented steps taken by the government of the Custodian of the Two Holy Mosques and his Royal Highness the Crown Prince (both at the financial and health fronts), have helped mitigate the impact of the COVID-19 pandemic on the Saudi economy. In addition to the foregoing, SAMA's initiatives have also contributed to curbing the impacts of this pandemic, broadly on the private sector and particularly on small and medium enterprises (SMEs).
H.E. Dr. Al-Mubarak projected the continued recovery in growth with an expansion in vaccination coverage against COVID-19, in addition to easing the precautionary measures implemented in Saudi Arabia and the rest of the world, which would reflect on the global demand on oil, travel and tourism traffic, and other activities. Dr. Al-Mubarak added, the Saudi economy has improved noticeably following the dwindle in COVID-19 pandemic, especially after opening the economic activities, supported generally by the growth of the non-oil sector and specifically by the private sector. The results of the first quarter of 2021 indicate a speedy recovery in the economy, as the non-oil GDP (real) grew by 2.9 percent, the private sector by 4.4 percent, and the final consumption of the private sector by 1.3 percent. The national unemployment rate also improved, falling down to 11.7 percent from 12.6 percent during the fourth quarter of 2020. As for micro, small and medium enterprises that remain impacted from the precautionary measures implemented to counter the pandemic, H.E. Dr. Al-Mubarak empathized that SAMA took several actions and launched a number of programs last year, and has done the same this year, to support SMEs and consequently promoting economic growth.
In reference again to the Annual Report, it indicated that SAMA will continue adopting a policy related to managing monetary policy, with the aim of maintaining the stability of exchange rates, as well as the soundness and stability of the financial system to support economic growth. Additionally, in 2020, money supply grew by 8.3 percent to SAR 2,149.3 billion. Despite the circumstances brought about by the COVID-19 pandemic, the Saudi banking sector remained resilient and stable, owing to the actions and measures undertaken collectively by SAMA and Saudi banks. Such actions and measures played a significant role in mitigating the adverse impacts of the pandemic on the private and banking sectors. Commercial banks displayed its good performance in 2020, with their total assets increasing by 13.2 percent to SAR 2,979.5 billion and total banking deposits by 8.2 percent to SAR 1,943 billion. Furthermore, the Report shed light on SAMA's efforts in the area of oversight and supervision through effective supervision of the financial sector in order to boost the sector's sentiment and ensure its soundness and achieve highest levels of efficiency. At the end of 2020, the Basel III capital adequacy ratio reached 20.3 percent, the liquidity coverage ratio 200.58 percent and the net stable funding ratio 127.19 percent. These indicators demonstrate the resilience of the Saudi banking system and its satisfactory liquidity levels that are available to support all sectors of the national economy
The Report highlighted SAMA's efforts in managing its foreign assets according to the best international standards, controls and practices related to foreign assets management. In addition, investment is carried out through strong, diversified investment portfolios that are managed effectively in order to optimize the distribution of assets and benefit from investment opportunities. SAMA is keen on adopting the best international practices and standards, and implementing latest systems used in managing risks and measuring investment performance. With regards to the financial position, SAMA's total assets amounted to SAR 1.8 trillion in 2020.
The Report also included SAMA's endeavors to fulfill the mandates entrusted to it in line with national economy requirements to counter global challenges and realize the Saudi Vision 2030. This includes: promoting financial inclusion, developing the finance ecosystem for SMEs, supporting real estate finance, developing modern payment systems and methods, developing the FinTech sector, and continuing the regulation and development of the insurance sector while implementing efficient oversight that would maintain a stable financial sector. In addition, the Report contained SAMA's efforts that have been exerted in partnership with the Ministry of Finance and the Capital Market Authority for the purpose of implementing the initiatives falling under the Financial Sector Development Program (FSDP), which aims to build an advanced and effective financial sector to support the growth of the national economy and incentivize savings, finance and investment through developing and deepening financial sector institutions. Of the 41 initiatives of the FSDP, SAMA has realized 12 out of 16 SAMA-owned initiatives in one year.
It is worth mentioning that monetary and banking indices continued registering a good performance in 2021 in spite of the volatility witnessed by the world due to the conditions caused by the pandemic and the emergence of new variants of coronavirus, evidenced by a year-on-year increase in money supply of 6.7 percent to SAR 2,213.4 billion in May and the increase in bank deposits of 7.5 percent to SAR 2,001.2 billion. Additionally, bank credit extended to the private sector grew by 16.0 percent to SAR 1,840.8 billion. For more information, you can view the Annual Report on SAMA's website at this (link).
