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IMF Raises Expectations for Saudi Growth

IMF Raises Expectations for Saudi Growth
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IMF Raises Expectations for Saudi Growth

IMF Raises Expectations for Saudi Growth

The International Monetary Fund (IMF) has raised its economic growth forecasts for Saudi Arabia as oil prices riseو but retained its estimates for the region in general.

The IMF said Monday in its report that the Saudi economy is expected to grow by 1.6 percent in 2018, up 0.5 percent from its October estimates.

It also predicted that the oil-rich economies would grow by 2.2 percent in 2019, a 0.6 percent increase from their previous forecast for 2019.

The Kingdom’s economy shrank 0.7 percent in 2017, for the first time since 2009.

The IMF, however, maintained its October projections for growth in the Middle East, North Africa, Afghanistan and Pakistan (MENAP) region at 3.6 percent and 3.5 percent for this year and 2019, respectively.

“While stronger oil prices are helping a recovery in domestic demand in oil exporters, including Saudi Arabia, the fiscal adjustment that is still needed is projected to weigh on growth prospects,” the IMF said.

It said oil prices rose 20 percent between August and October of 2017.

Saudi Arabia said it expects to post a budget deficit for the fifth year in a row in 2018, forecasting a shortfall of $52 billion due to low oil prices.

Revenues are estimated to be 783 billion riyals ($208.8 billion) and spending is expected to be 978 billion riyals ($260.8 billion), the highest in the oil-rich kingdom's history.

The Saudi finance ministry said the budget deficit for 2017 came in at $61.3 billion, which is higher than the expected $53 billion but still lower than the $82 billion shortfall in the previous year.

The kingdom has posted a budget deficit every year since 2014 when the price of oil, which contributed about 90 percent of revenues, crashed.

Riyadh has resorted to a string of austerity measures to contain spending and imposed a variety of subsidy cuts and rises in prices of services.

It also introduced a series of measures to boost non-oil income including the introduction a value-added tax (VAT) of five percent starting this year.

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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)

Telecommunications companies listed on the Saudi Stock Exchange (Tadawul) achieved a 12.46 percent growth in their net profits, which reached SAR 4.07 billion ($1.09 billion) during the second quarter of 2024, compared to SAR 3.62 billion ($965 million) during the same period last year.

They also recorded a 4.76 percent growth in revenues during the same quarter, after achieving sales worth more than SAR 26.18 billion ($7 billion), compared to SAR 24.99 billion ($6.66 billion) in the same quarter of 2023.

The growth in the revenues and net profitability is the result of several factors, including the increase in sales volume and revenues, especially in the business sector and fifth generation services, as well as the decrease in operating expenses and the focus on improving operational efficiency, controlling costs, and moving towards investment in infrastructure.

The sector comprises four companies, three of which conclude their fiscal year in December: Saudi Telecom Company (STC), Mobily, and Zain Saudi Arabia. The fiscal year of Etihad Atheeb Telecommunications Company (GO) ends on March 31.

According to its financial results announced on Tadawul, Etihad Etisalat Company (Mobily) achieved a 33 percent growth rate of profits, bringing its profits to SAR 661 million by the end of the second quarter of 2024, compared to SAR 497 million during the same period in 2023. The company also achieved a 4.59 percent growth in revenues to reach SAR 4.47 billion, compared to SAR 4.27 billion in the same quarter of last year.

The Saudi Telecom Company achieved the highest net profits among the sector’s companies, at about SAR 3.304 billion in the second quarter of 2024, compared to SAR 3.008 billion in the same quarter of 2023. The company registered a growth of 4.52 percent in revenues.

On the other hand, the revenues of the Saudi Mobile Telecommunications Company (Zain Saudi Arabia) increased by about 6.69 percent, as it recorded SAR 2.55 billion during the second quarter of 2024, compared to SAR 2.39 billion in the same period last year.

Commenting on the quarterly results of the sector’s companies, and the varying net profits, the head of asset management at Rassanah Capital, Thamer Al-Saeed, told Asharq Al-Awsat that the Saudi Telecom Company remains the sector leader in terms of customer base expansion.

He also noted the continued efforts of Mobily and Zain to offer many diverse products and other services.

Financial advisor at the Arab Trader Mohammed Al-Maymouni said the financial results of telecom sector companies have maintained a steady growth, up to 12 percent, adding that Mobily witnessed strong progress compared to the rest of the companies, despite the great competition which affected its revenues.

He added that Zain was moving at a good pace and its revenues have improved during the second quarter of 2024. However, its profits were affected by an increase in the financing cost by SAR 26.5 million riyals and a rise in interest, while net income declined significantly compared to the previous year, during which the company made exceptional returns.