Jadwa Investment expects improvement in Saudi economy to boost private sector loans

Saudi Riyal

Jadwa Investment expects the continued improvement in the local economy during the second half of 2021 to have a positive impact on loans provided to the private sector.

This could result in slight increases in local funding rates, the investment firm said in a recent report.

Jadwa also expects to see an expansion in lending for the next phase of Vision 2030, as recently unveiled Vision Realization Programs for 2021-2025 are implemented.

The "Shareek" program, which aims to forge a partnership between the public sector and certain listed private sector companies, will substantially raise the level of bank financing needed to meet the target of investing SAR 5 trillion in new investments by 2030.

The continued positive investor sentiment could further erode deposit growth, Jadwa said, expecting the growth in private sector deposits with banks to slow, or even reverse for some time during 2021.

The US Federal Reserve is unlikely to raise the federal fund interest rate in the short-term. In-line with this, SAMA is expected to keep key repo and reverse repo rates unchanged in the foreseeable future.

"That said, we do nevertheless expect to see some rises in SAIBOR in the near term. As noted above, higher demand for credit, declining private sector deposits and expiration of some of SAMA’s programs, are expected to add to moderately tighter liquidity conditions in the near term," Jadwa said.