Mobile  |  About us  |  Photos  |  Videos  |  Subscriptions  |  RSS Feeds  |  Today's Paper  |  Classifieds  |  Contact Us
The Daily Star
FRIDAY, 25 APR 2014
08:19 AM Beirut time
Weather    
Beirut
22 °C
Blom Index
BLOM
1,214.01down
Middle East
Follow this story Print RSS Feed ePaper share this
Saudi central bank sees inflation at tolerable levels
Reuters
Saudi Central Bank Governor Fahad al-Mubarak speaks during a news conference in Riyadh March 3, 2013. REUTERS/Faisal Al Nasser
Saudi Central Bank Governor Fahad al-Mubarak speaks during a news conference in Riyadh March 3, 2013. REUTERS/Faisal Al Nasser
A+ A-

RIYADH: Inflation in Saudi Arabia is running at acceptable levels, the country's central bank chief said on Sunday, playing down concerns that the economy could be overheating.

Fahad al-Mubarak, governor of the Saudi Arabian Monetary Agency (SAMA), told a news conference inflation was expected to ease next year having edged up to a seven-month high of 4.2 percent year-on-year in January.

Mubarak, a former chairman and managing director of Morgan Stanley Saudi Arabia, has not met the press inside the kingdom since being appointed in December 2011, though he did speak in public in Abu Dhabi last year.

"Current inflation is tolerable and if you compare to other emerging markets we are well below," he said. "The expectation for this year and next year - and I will cite the IMF (International Monetary Fund) - is expected to be a bit lower at 4.6 in 2013 and 4.3 in 2014."

SAMA said in January inflationary pressures in the kingdom should remain stable in the first three months of this year.

The world's top oil exporter has recovered since a 2009 downturn, helped by heavy public spending on welfare and housing construction, driven in part by reaction to unrest elsewhere in the Arab world.

Asked if he was concerned about the high level of bank lending to the private sector, Mubarak said: "Not at all. The bank lending to the private sector is consistent with all the policies that SAMA puts (in place) and monitors."

Bank lending to Saudi Arabia's private sector rose 15.9 percent in January, only slightly slower than a 16.4 percent increase in the previous month, which was the fastest clip since February 2009.

He said the ratio of loans to deposits among the banks was about 75 percent, below the level of 85 percent which SAMA sets as a cap to limit loan growth.

"It is positive that the banks continue to lend to the private sector," he said, adding that the quality of banks' lending portfolios had improved in recent years, resulting in fewer bad loans.

KEY RATES

Mubarak also said SAMA's key policy rates - the repo and reverse repo - were appropriate since there were no signs of economic overheating, and their current levels of 2.0 percent and 0.25 percent, respectively, served banks quite well.

"The only (development that would change this interest rate policy) is if it causes overheating to the economy. We don't see it overheating. It is quite normal," he said.

Saudi Arabia pegs its riyal to the dollar, which Mubarak said continued to serve its economy well, repeating the country's long-standing policy position.

Because of the peg, SAMA needs to keep its policy rates near U.S. benchmarks to avoid excessive pressures on its currency link.

SAMA last changed its repo rate in January 2009, cutting it by 50 basis points to temper the impact of the global crisis. It reduced its reverse repo rate by 25 basis points in June 2009.

"As you notice throughout the world they are moving toward the very low interest rate and the objective of that is to continue to support lending to the private sector to participate in growth and create jobs," Mubarak added.

Mubarak declined to provide a forecast for Saudi economic growth, saying SAMA took guidance from IMF predictions of 4.2 percent in 2013 and 3.8 percent in 2014.

Growth of the $728 billion Saudi economy, the largest in the Arab world, slowed to 6.8 percent last year from 8.5 percent in 2011, when it was buoyed by a higher oil output to compensate for shortages due to a civil war in Libya.

 
Home Middle East
 
     
 
Saudi Arabia
Advertisement
Comments  

Your feedback is important to us!

We invite all our readers to share with us their views and comments about this article.

Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.

comments powered by Disqus
Advertisement


Baabda 2014
Advertisement
Follow us on Facebook Follow us on Twitter Follow us on Linked In Follow us on Google+ Subscribe to our Live Feed
Multimedia
Images  
Pictures of the day
A selection of images from around the world- Thursday April 24, 2014
View all view all
Advertisement
Rami G. Khouri
Rami G. Khouri
Israel shows Zionism’s true colors
Michael Young
Michael Young
For Christians, blessed are the dividers
David Ignatius
David Ignatius
An Iran deal is close, but we’re not there yet
View all view all
Advertisement
cartoon
 
Click to View Articles
 
 
News
Business
Opinion
Sports
Culture
Technology
Entertainment
Privacy Policy | Anti-Spamming Policy | Disclaimer | Copyright Notice
© 2014 The Daily Star - All Rights Reserved - Designed and Developed By IDS