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Saudi Arabia's Liquidity Hits All-Time High of SAR2.825 Trillion

Saudi Arabia's Liquidity Hits All-Time High of SAR2.825 Trillion
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Saudi Arabia's Liquidity Hits All-Time High of SAR2.825 Trillion

Saudi Arabia's Liquidity Hits All-Time High of SAR2.825 Trillion

Saudi Arabia's liquidity levels continued to grow strongly, reaching SAR2,825,715 million at the end of May 2024, marking an annual growth of approximately 8.6%, reported the Saudi Press Agency on Sunday.

This represented an increase of more than SAR222,928 billion compared to the same period in 2023, which stood at SAR2,602,786 million. These levels reflect the broad money supply (M3) as reported in the Saudi Central Bank (SAMA)'s monthly statistical bulletin for May 2024.

Since the beginning of the year, liquidity has grown by 4%, representing an increase of more than SAR104,757 billion. At the end of January, it stood at SAR2,720,957 million.

Liquidity levels also achieved a monthly growth of approximately 1.2%, with an increase of about SAR32,402 billion compared to the end of April of the same year when it stood at SAR2,793,313 million.

These liquidity levels strongly support economic and commercial activity, contributing effectively to the economic development process and enabling the achievement of the goals of Saudi Vision 2030. This reflects the strength and solidity of the banking and financial sector.

A breakdown of the four components of the broad money supply (M3) is as follows: Demand deposits, the largest contributor to the total money supply (M3) at 49.2%, recorded a level of SAR1,390,893 million at the end of May 2024.

Time and savings deposits, the second-largest contributor to the total money supply (M3) at 31.5%, recorded a level of SAR889,558 million.

Other quasi-money deposits amounted to SAR314,807 million, representing a contribution of approximately 11.1% to the total money supply (M3), making it the third-largest contributor. Lastly, "currency in circulation outside banks" amounted to SAR230,456 million, contributing approximately 8.2% to the total money supply (M3).

Quasi-money deposits consist of residents' deposits in foreign currencies, deposits against letters of credit, outstanding transfers, and repurchase agreements (repos) conducted by banks with the private sector.

Domestic liquidity includes M1, which comprises currency in circulation outside banks in addition to demand deposits only, and M2, which includes M1 plus time and savings deposits. The broad definition, M3, includes M2 plus other quasi-money deposits.

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After Trump’s Victory, Arab Demands for Competitive Advantages Due to Regional Tensions

Donald Trump addresses his supporters at the West Palm Beach Convention Center in Florida on Wednesday. (EPA)
Donald Trump addresses his supporters at the West Palm Beach Convention Center in Florida on Wednesday. (EPA)
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After Trump’s Victory, Arab Demands for Competitive Advantages Due to Regional Tensions

Donald Trump addresses his supporters at the West Palm Beach Convention Center in Florida on Wednesday. (EPA)
Donald Trump addresses his supporters at the West Palm Beach Convention Center in Florida on Wednesday. (EPA)

With the election of Donald Trump as US president, the global economy has gained direction for the coming years. Trump’s policies favor corporate tax cuts, increased investment, and expansionary monetary policies. He also promotes local production to boost job creation, which involves imposing significant tariffs on trade partners, particularly in Asia. This approach could trigger a trade war, affecting inflation in both the US and worldwide.

The US economy is already grappling with high prices, slower economic growth, and rising unemployment, alongside a national debt nearing 99% of GDP. This backdrop underscores the importance of economic issues in the recent election.

For the new US administration, domestic concerns will not be the sole priority. Ongoing geopolitical tensions, especially recent Middle Eastern conflicts, will also impact the US economy. To gain regional insights, Asharq Al-Awsat consulted economists from various Arab nations on their expectations and requests from the US president regarding the Middle East.

Priority of Regional Stability

Dr. Mohamed Youssef, an Egyptian economist, emphasized that regional stability is crucial, benefiting the economy and paving the way for resolving complex issues like the Nile Dam dispute affecting Egypt. He highlighted the American role in fostering calm in the region.

Iraqi economist Durgham Mohamed Ali noted that US relations vary across the Middle East; while Lebanon and Yemen remain outside current US alliances, Sudan and Somalia require international aid to rebuild infrastructure.

Competitive Advantage for Arab Countries

Ahmed Moaty, a global markets expert from Egypt, suggested that reduced US tariffs would improve Arab economies’ competitiveness. However, he pointed out the American high debt could motivate the administration to impose tariffs to protect local industries and reduce imports. Ali observed that US tariffs are interest-driven and selective, favoring allies like Japan, Taiwan, and South Korea while being stringent toward BRICS members, such as China, Brazil, and South Africa. He linked tariff policies to regional geopolitics, especially the conflicts involving Israel, Lebanon, Palestine, and Iran, which could influence US economic decisions.

Dr. Mohamed Youssef also argued that easing US-China competition could benefit the global economy, as high tariffs on Chinese goods reduce China’s growth, decreasing demand for key commodities like oil.

Ibrahim Al-Nwaibet, CEO of Saudi Arabia’s Value Capital, predicted that a Republican win could positively impact oil and interest rates, revitalizing the petrochemical and trade finance sectors.

On currency, Moaty noted the strong US dollar pressures emerging markets, especially in the Middle East. He suggested offering US Treasury bonds with higher yields to Arab countries as a counterbalance. Ali added that the dollar’s strength poses challenges for countries heavily reliant on US currency amid global liquidity shortages.

The BRICS Bloc

Ali also mentioned the high levels of US debt, explaining: “In general, the entire world is concerned about rising US debt, slowing growth rates... and is wary of the BRICS alliance, which some Arab countries hope to join. The question remains whether a cold economic war will ensue.”

Youssef also discussed the BRICS, which could play a role in attracting the new US president’s attention to countries joining the alliance. He added: “This may provide new competitive advantages for countries in the region, particularly as countries like Egypt, the UAE, and Iran recently joined BRICS, while Saudi Arabia is still evaluating the benefits of such move.”