ECONOMIC TRENDS

HEALTHY TRADE FLOWS PUT SAUDI ECONOMY BACK ON TRACK

Saudi Arabia’s exports galloped ahead in the second quarter, rising an impressive 99.4% compared to the same period last year.

Like the rest of the world, Saudi’s exports had declined to SAR 119.65 billion in the second quarter of 2020, but have now soared to SAR 238.62 million in the second quarter of 2021 – its best performance in five quarters, according to the General Authority for Statistics (GASTAT) data.

A strong rebound in oil prices helped oil exports, as efforts by Saudi Arabia and its OPEC allies to stabilise the crude oil market paid off handsomely.

Oil prices that had plunged during Q2 of 2020, have traded comfortably over USD 70 per barrel for much of this year.

“This increase originated mainly from oil exports, which rose by SAR 96.5 billion or 126.1% in the same period,” according to GASTAT. “The share of oil exports in total exports increased from 63.9% (Q2 2020) to 72.5% (Q2 2021). Compared to the previous quarter (Q1 2021), total merchandise exports increased by SAR 26.1 billion or 12.3%.”

Non-oil exports also launched an impressive recovery, with shipments reaching SAR 65.65 billion, its best figure in at least five quarters.

Adding the SAR 60 billion worth of shipments in the first quarter, the non-oil exports sector is on pace to have its best annual performance in more than a decade, eclipsing the SAR 235.4 billion achieved in 2018, data gleaned from GASTAT show.

Among non-oil exports, plastics and rubber (34.3% of non-oil merchandise exports) rose by 63.9% to SAR 8.8 billion, and chemical and allied products (31% of non-oil merchandise exports) surged 61.9% to SAR 7.8 billion, compared to the same period last year.

“Merchandise imports increased by 12.9% (SAR 16.1 billion) in Q2 2021. The value of imports amounted to SAR 140.9 billion in Q2 2021 compared to SAR 124.8 billion in Q2 2020,” GASTAT noted.

The increase was primarily due to a 26.8% rise in vehicles and other transport equipment, and a staggering 452.2% surge in imports of imitation jewellery.

China was Saudi Arabia’s main export destination accounting for SAR 46.4 billion, or 19.4% of total exports. India and Japan followed next with SAR 21.7 billion (9.1% of total exports) and SAR 20.7 billion (8.7% of total exports), respectively. South Korea, the USA, United Arab Emirates, Egypt, Netherlands, Singapore, and Taiwan were among the top 10 destinations for Saudi exports.

“Imports from China amounted to SAR 25.7 billion (18.2% of total imports) in Q2 2021, making this country the main origin for imports of Saudi Arabia. United Arab Emirates, and USA followed next with imports of SAR 13.5 billion (9.6% of total imports) and SAR 13.1 billion (9.3% of total imports), respectively,” GASTAT noted.

Saudi Arabia’s non-oil economic activity continued to grow, albeit at a moderated pace in August, according to the purchasing managers’ index conducted by research firm IHS Markit.

“New business continued to grow sharply over the month, although as was the case for output, the rate of growth slipped from July,” IHS noted. “This was partly due to a softer increase in export sales, as the resurgence of COVID-19 cases in other parts of the world dampened the recovery in foreign demand.”

Total consumer loans also rose to SAR 394 billion in the second quarter (compared to SAR 279.5 billion in the first quarter), while credit card loans reached SAR 18.2 billion (compared to SAR 17.7 billion in the first quarter) in a sign of increased consumer activity.

The number of transactions in the second quarter also hit new highs as did the number of point-of-sales terminal transactions, according to the Saudi Central Bank data.

Ecommerce sales hit a record SAR 17.18 billion during the second quarter, while the number of transactions also reached a record 79.89 million.

Unlike much of the world, Saudi Arabia’s inflation remains subdued as impact of the value added tax (VAT) recedes.

“The Consumer Price Index for July 2021 increased by 0.4% compared to the same month last year (July 2020), less than June 2021 (6.2%). The impact of the increase of the VAT from 5% to 15% in July 2020 (base effect) fades out in July 2021 and does not affect the annual change of the CPI anymore,” according to GASTAT.

The CPI rose primarily due to higher prices of transport (+7.8%), and food and beverages (+1.2%), the statistics agency said.