Saudi Citizens on Savings Spree, Highest in Nearly a Decade

Saudi Arabian Monetary Authority (SAMA), the Kingdom’s Central Bank said that the Saudi citizens exhibited a remarkable surge in their savings habits in August, achieving the highest savings rate in over a decade.

In a data released by the Saudi Central Bank, the money supply expanded by 10% compared with the same period the previous year, marking the most substantial annual growth since August 2014. The money supply encompasses currency outside banks, demand deposits, time and savings deposits, and other quasi-money deposits.

The most notable increase was observed in time and savings accounts, which soared by 54.17% compared with August the previous year. This is also seen as an unparalleled yearly expansion for this account category, according to datya compiled by English daily Arab News.

Mazen Al-Sudairi, head of research at Al Rajhi Capital, told the daily that time deposits typically offer more attractive interest rates compared to demand deposits.

“In an environment of rising interest rates, individuals and businesses may find time deposits appealing as they provide an opportunity to earn higher returns on their savings over the deposit period,” he added.

Time deposits surged to $215.66 billion in August, marking a substantial rise from $6.6 billion recorded in the same month the prior year. Notably, the proportion of time deposits within the total money supply reached its highest level in more than a decade.

The percentage share of time deposits within the overall money supply stood at 30.27% in August, whereas demand deposits accounted for 49.32% of the total. Comparing these figures to the same period the previous year, time deposits represented only 21.5% share of total money supply, while demand deposits were at 57.2%.

The latter did experience an annual decline of 5.52% from the previous August, amounting to $350 billion. 

Saudi Arabia has maintained a fixed exchange rate system, with the currency pegged to the dollar, meaning SAMA follows the US Federal Reserve’s lead on rate moves. This has led to Saudi Central Bank repo rates climbing from 1% to 5.5% in just one year.

Healthy Inflation Rate

Furthermore, Saudi Arabia has maintained a healthy inflation rate, standing out as many countries worldwide struggle with escalating prices due to economic uncertainties. Nevertheless, concerns about rising inflation may motivate people to opt for time deposits as a means to safeguard the purchasing power of their savings, particularly when the interest rates on these deposits outpace the rate of inflation.

The overall bank deposits also exhibited robust growth in August, expanding by 10% compared to the same period in the previous year, reaching a total of $660 billion. Even the total banks’ credit displayed a matching annual growth rate of 10%, accumulating to $670 billion, according to data released by SAMA.

Personal loans constitute 48% of total advances, amounting to $320 billion this August, marking an 8% increase compared to the same month the previous year.

In August, bank credit granted for the purpose of education increased by 62% compared to the same period last year, reaching $1.6 billion. 

Lending for the electricity, gas and water supplies sector experienced a noticeable growth, surging 37% during the same period to reach $35.45 billion.

The increased demand for credit, originating from both businesses and individuals seeking loans for investment and consumption, aligns with the healthy performance of the economy. Simultaneously, favourable economic conditions have encouraged people to save more, thus contributing to overall financial stability.