RIYADH, (Reuters) – Saudi Arabia’s central bank governor moved to ease worries about the health of the economy on Monday, saying no banks faced liquidity problems and the stock market rout was due to fear not fundamentals.
“There is not even one (bank) close to confronting problems,” Hamad Saud al-Sayyari told reporters. “Banks in reality are in an excellent position.”
The Saudi Arabian Monetary Agency, the kingdom’s central bank, has poured about $3 billion in U.S. dollar liquidity into bank deposits over the past two weeks, the governor said.
Sayyari’s assurances came as the world’s largest oil exporter saw its bourse tumble 4.15 percent to its lowest level in at least two years. The index, the Arab world’s largest exchange, is down some 50 percent this year.
He blamed the market’s decline on poor investment sentiment stemming from the global financial crisis, not economic fundamentals, and said the country’s economy and banking sector were sound.
The central banker said Saudi Arabia’s crude oil and petrochemical exports would be affected by the global economic turmoil but noted that a downturn would also lead to a speedier decline in the country’s inflation rate.
Sayyari said last month the inflation rate, which stood at 10.9 percent in August, could begin declining in the first quarter of 2009.
To cope with the global crisis, the kingdom has this month alone made a rare benchmark interest rate cut, poured billions into banks to ease tight liquidity conditions and given a $2.7-billion grant to help low-income citizens having difficulty getting loans.
Saudi Arabia’s Supreme Economic Council, the highest economist body, has also offered guarantees for bank deposits, Sayyari said.
On Monday, al-Sayyari said public spending in the world’s top oil exporter had risen 19 percent so far this year and economic growth prospects remained strong for this year and 2009.
“Domestically, economic developments are good and encouraging,” he said. “We constantly monitor more than 40 indicators … all of these indicators show continuous growth and I expect growth this year to be good and also for next year.”
He added that continued growth in public spending would fuel consumer spending and private sector investment: “All of them are showing good growth rates,” he said.