Fahad Abdullah Al-Mubarak, governor of Saudi Arabian Monetary Agency (SAMA), asserted on Sunday that the current central bank policy rates are reasonable and balanced, and tapering of the US Federal Reserve’s bond purchases was unlikely to affect its monetary policy direction.
He also voiced confidence that Saudi Arabia’s economy can achieve growth of 4.4 percent in 2014, in line with a forecast by the International Monetary Fund (IMF).
Inflation rose from 2.9 percent in 2012 to 3.5 percent last year but “remains under control”, said the governor.
The inflation rate was 3.7 percent in 2011, he told a press conference while releasing the 49th annual report of SAMA.
“Our policy rate, I think it is reasonable and balanced and it will achieve our policy objective given our fiscal situation,” he said at the annual news conference. He indicated that the private sector will be the main growth engine this year.
“Government investments continue to be the main driver for private sector growth. I am optimistic about it as the private sector grew 5.5 percent attributing economic growth in the Kingdom,” he stated.
“I do not see high risks in specific areas.”
The governor added: “In terms of QE (quantitative easing), we were not affected much by its implementation in the first place. Now, that is being withdrawn, we don’t have to see an effect on our monetary policy or our banking system.”
In a recent report, the IMF had forecast that the GCC countries including Saudi Arabia will register a 4.4 percent growth rate in 2014.
The 4.4 percent growth rate for the Kingdom is more than the 3.8 percent in 2013, but less than the growth rate of 5.1 percent in 2012 and 8.6 percent in 2011.
The SAMA chief, however, confirmed that the Kingdom’s real gross domestic product last year at 3.8 percent was higher than the 2.9 percent growth rate of the global economy during the same period.
The economic growth rates (in real terms) in some GCC countries went down during 2012.
Al-Mubarak announced said that the recent upgrade by Fitch Ratings makes Saudi Arabia more attractive to investors.
While a number of industrialized countries’ credit ratings had declined, Fitch, a globally-recognized credit rating agency, recently increased the sovereign rating of the Kingdom from AA- to AA.
Citing statistics from the Ministry of Finance, he said the Kingdom achieved an actual surplus of SR180.3 billion in the general bud- get of 2013 and public debt dropped to SR75.1 billion, representing 2.7 percent of the GDP.
The Kingdom, which has pegged its riyal to the US dollar, has kept its repo rate at 2.0 percent since January 2009 and its reverse repo rate at 0.25 percent since June 2009, despite a series of cuts that followed the 2008 economic meltdown leading to glob- al financial crisis.
He said the Kingdom achieved a budget surplus of SR486.8 billion surplus in 2013.
The governor pointed out that the rate of inflation in emerging and developing economies in 2013 is estimated at about 6.2 percent, he said, adding that inflationary pres- sures in the Kingdom are attribut- able to housing and food prices.
According to the SAMA report, the tourism sector will create about 1.3 million direct and indirect jobs by 2015 and about 1.8 million by the year 2020.
It will offer direct jobs in the sub sectors as well as indirect employ- ment opportunities induced by tour- ism activity in other economic sec- tors linked to tourism.
Based on official data obtained from ministries, government depart- ments and public sector enterprises, in addition to a host of data issued by SAMA itself, the annual report covers various areas of the domestic econo- my, including monetary develop- ments, banking activity, capital mar- ket, prices, public finance, national accounts, foreign trade and balance of payments.
Apart from providing an overview of latest global economic and finan- cial developments, the report gives full description of SAMA’s functions such as designing and conducting monetary policy and supervising commercial banks and cooperative insurance activity.