Liquidity in the Saudi economy reached 3.3 trillion riyals, representing a growth of 8.4%
In a new indicator of the strength and resilience of the Saudi economy, the monthly statistical bulletin issued by the Saudi Central Bank (SAMA) showed that domestic liquidity, represented by broad money supply (M3), recorded remarkable annual growth at the end of February 2024. The annual increase amounted to approximately 255.7 billion riyals, an increase of 8.4%, bringing the total volume of liquidity in the arteries of the economy to approximately 3.289 trillion riyals, compared to about 3.033 trillion riyals in the same period of the previous year, 2023.
General context: A key driver in the economic transformation process
This strong growth in liquidity comes amidst the major economic transformations underway in Saudi Arabia under the umbrella of Vision 2030. This ambitious vision, which aims to diversify income sources and reduce dependence on oil, has unleashed massive development projects and investments in promising non-oil sectors such as tourism, entertainment, technology, and industry. Financing these mega-projects requires a robust banking sector and ample liquidity, as reflected in the current figures. The increase in the money supply indicates growing economic activity, a higher rate of lending to individuals and businesses, and increased confidence in the local investment environment, confirming that the Saudi financial sector is playing a pivotal role as a key supporter of achieving the Vision's objectives.
Details of cash liquidity components
Analyzing the components of the money supply (M3), it becomes clear that growth was primarily driven by an increase in “time and savings deposits,” which led the rise with an increase exceeding SAR 167.1 billion. This was followed by “other quasi-money deposits,” which recorded an increase of more than SAR 60.6 billion. In terms of relative distribution, “demand deposits” topped the list of components with a share of 45.2% of the total, amounting to approximately SAR 1.488 trillion. “Time and savings deposits” came in second place with a share of 36.4%, amounting to SAR 1.198 trillion, reflecting the growing culture of saving and investment among individuals and institutions.
The importance and expected impact of growth
This surge in liquidity has significant economic implications across various sectors. Domestically, it enhances the capacity of commercial banks to finance small, medium, and large enterprises, and supports domestic demand by facilitating consumer credit, thereby contributing to job creation and driving growth in the non-oil private sector. Regionally and internationally, these figures solidify the Kingdom's position as the largest economy in the Middle East and a key player in the G20. They also send a strong message to foreign investors about the stability and attractiveness of the Saudi market, potentially attracting further foreign direct investment, a primary objective of Vision 2030. The Saudi Central Bank plays a vital role in managing this liquidity to ensure financial stability and curb inflation, maintaining a delicate balance that supports sustainable growth.
“Other quasi-monetary deposits” refers to residents’ foreign currency deposits, deposits against letters of credit, outstanding transfers, and repurchase (repo) transactions executed with the private sector, which are financial instruments that reflect the development and depth of the banking sector in the Kingdom.
