Saudi Arabia announced an increase in gasoline prices today (January 1), part of the economic reforms post the hike in electricity tariff, introduction of VAT , and citizen account programme, affirming its commitment on fiscal balance programme and Vision 2030, a report said.
Economic indicators appear to be stable with SAMA data showing that reserve assets grew marginally in November (+0.2 per cent m-o-m), rising for the second consecutive month, added the Economic research from Al Rajhi Capital, a top financial services provider in Saudi Arabia.
Meanwhile, credit to the private sector was broadly flat (-0.3 per cent m-o-m), while lending to the government entities grew (+2.3 per cent m-o-m).
Total deposits slipped marginally (-0.1 per cent m-o-m) due to decline in time & saving deposits, even while demand deposits grew. As a result, LDR ratio eased to 82 (October: 82.46). POS transactions grew 10.1 per cent y-o-y due to lower spending last year on account of the cut in public sector allowances.
Cost of living rose for the first time in 11 months (+0.1 per cent y-o-y). Inflation is likely to rise further in coming months on the back of the low base of last year, the announced hike in electricity prices, fuel prices and implementation of VAT.
The 2017 preliminary real GDP data showed that the economy contracted 0.74 per cent y-o-y, mainly due to the cut in oil production, even though the non-oil growth accelerated (+1.01 per cent y-o-y). The trend in non-oil economy is expected to continue with the government announcing its biggest ever budget for 2018, increasing spending to SR978 billion ($260 billion), 5.6 per cent higher than the expenditure in 2017.
Hike in gasoline prices: The government increased the prices of gasoline effective Jan 1, 2018. In-line with the fiscal balance programme objectives, the gasoline prices were hiked to ensure rationalization of the consumption.
Octane-91 prices were hiked to SR1.37 ($0.36) per litre (up 83 per cent from SR0.75 earlier) and Octane-95 prices were hiked to SR2.04 per litre (up 127 per cent from SR0.90 earlier). The prices are inclusive of VAT, which again is effective from Jan 1, 2018.
However, the diesel and kerosene prices were not hiked, which mainly have applications in industrial usage and commercial transportation. Though this could weaken consumption, this was expected and should reaffirm the government’s resolve to on driving the growth of non-oil economy.