SAMA STEPS IN TO SUPPORT PRIVATE BUSINESSES

Saudi authorities continue to support businesses as they navigate the COVID-19 challenge.

In September, the Saudi Arabian Monetary Authority said it will extend the Private Sector Financing Support Program by another three months to 14 December. The programme was initiated on 14 March to help the financial service sector “support the private sector's business continuity” and support employment.

Since the programme’s launch, the deferred payments programme has reached 71,764 enterprises, amounting to SAR 50.6 billion, exceeding the SAR 30 billion allocated to the programme at launch.

“Contracts of finance companies have reached 1,123 with a value of SAR 5.2 billion. The number of contracts of medium enterprises has amounted to 26,023 with a value of SAR 32.8 billion. Contracts of small enterprises have reached 18,618 with a value of SAR 9.4 billion. In addition, contracts of micro-enterprises have reached 26,000 with a value amounting to SAR 3.1 billion,” SAMA noted.

However, the banking sector remains fiscally sound and has the financial wherewithal to support the private sector, the authority added.

Mohammed Al-Jadaan, minister of finance and acting minister of economy and planning, believes the Saudi economy is recovering, noting that “2020 has been arguably the most challenging year possibly for the last 100 years not only economically or financially ,but also humanely as almost everybody around the world has been impacted by the pandemic.”

But the kingdom entered the global crisis from a position of strength, with growing sectors such as tourism, entertainment and financial technology registering growth of 3% to 8% last year, and the Saudi Vision 2030 programme starting to bear fruit.

“The Saudi economy was significantly impacted due to COVID-19. It almost went into economic hibernation. Oil markets were negatively impacted. Revenues from oil dropped significantly. You could obviously see the results when countries have announced their GDP. Various countries around the world dropped by 5%,10%, 15% and some countries announced a drop by 20%. This basically puts some countries 10 years back in terms of growth. They lost 10 years of their GDP", the minister of finance said.

Despite the challenges and a 1% drop in GDP in the first quarter of 2020, the Saudi economy managed to remain resilient. The non-oil sector was in positive territory for the quarter, up 1.6%, according to Invest Saudi, a unit of the Ministry of Investment, in its summer report.

“In a remarkable achievement, Q1 saw a continued acceleration of Saudi Arabia’s path towards economic diversification in line with the goals of Vision 2030. The non-oil sector contribution to GDP reached a new high of 59%,” according to Invest Saudi.

While industrial production index contracted 23% in April, the benchmark index rebounded 7% in May, while non-oil manufacturing activity rose 5.1% in June, according to the General Authority for Statistics and Information.

Consumer spending is also climbing back up.

“Point-of-Sale (PoS) transactions saw a positive 78.5% year-on-year jump in June to a record level of USD 9.9 billion, reversing sharp declines in April and May,” Invest Saudi said in its report. “June’s exceptional growth can be attributed to the pent-up demand following the lifting of lockdown measures, as well as a more structural shift towards cashless payments. As a result, cash withdrawals from ATMs dropped by 38% in May and 9% in June compared to the previous year.”

Despite a challenging climate for investment, the Saudi economy saw 156 new foreign investment projects licensed in the second quarter, compared to 294 for in the same period last year. The drop is understandable given that the global investment environment remains at a standstill.

Still, the first half of the year saw 506 new foreign investment projects, which is the second best year in at least five years, after the 586 projects approved in the first half of 2019.

“MISA’s Emerging Sectors, which include education, financial services, and housing, continued to see the highest number of new foreign investment projects in Q2, followed by the industrial and manufacturing, and ICT sectors,” Invest Saudi noted. Leading the way were US-based companies with 54 projects, Indian firms with 49 projects, and British company with 47 projects.