The private sector also mirrored the impact of the slump in “black gold” prices. The Emirates NBD Saudi Arabia PMI announced a lower average in the fourth quarter. The average PMI reading for Q4 recorded 55.5, two points lower than the 57.6 registered in the third quarter. This decline in PMI readings is reflecting the slow market conditions which have resulted in a weak expansion of new businesses in the country.
According to the Central Department of Statistics and Information in Saudi Arabia, the average annual inflation in 2015 registered 2.10%. In Q4 alone, the inflation recorded 2.44% in October and 2.28% in each of November and December. The most important components in the Consumer Price Index “Food and Beverages” and “Housing, water, electricity and gas” registered yearly increases of 1.6% and 3.5%, respectively. Rental inflation, reflecting the shortage of housing in the kingdom, also registered a yearly increase of 4.8% by the end of 2015. After being discussed for a long time, the Kingdom’s Council of Ministers finally approved a “white land” tax according to which an annual tax of 2.5% is to be paid on undeveloped land. The levied taxes are to be used to remedy the housing shortage in the Kingdom and to free-up unexploited lands which are currently used for speculation or as store of value.
As for the external front, weaker trade activity was registered in 2015. The imports and exports of goods and services declined by a yearly 8% and 39% to $234.55B and $217.73B, respectively. Imports of petroleum products (including refined products and natural gas) recorded a double digit yearly slump of 44% to $157.96B in light of the fall in the price of Brent Crude from $57.33/barrel at the end of 2014 to $37.28/barrel at the end of 2015. Non-oil exports were also on the down with a 17.99% yearly decline to $47.48B in 2015.
In 2015, Saudi Arabia recorded a fiscal deficit of $98B. Revenues dropped by an annual 42% to $162B and expenditures exceeded the initial budget allocation by 13% to reach $229B. Oil revenues dropped by an annual 23% to $118.5B while non-oil revenues grew by a yearly 29% to $43.6B. Expenditures were pushed upwards by military spending and by the salaries increase for public sector employees once King Salman took over the throne. The war in Yemen is estimated to have cost the Kingdom $5.3B in 2015.
To finance the fiscal deficit Saudi Arabia tapped into its government deposits and issued $26B worth of bonds. Public debt therefore rose to around $38B or 5.8% of GDP, according to Deutsche Bank. The Kingdom also sought to slash expenses by cutting fuel subsidies from 0.6 SAR ($0.16) per litre to 0.9 SAR ($0.24) per litre which in turn inflated fuel prices by 50%. The expected budget deficit for 2016 is expected to be lower at $87B as lower oil prices pull revenues down by 15% to $137B. Budget Spending is expected to drop to $224B after some projects were postponed, cancelled or reduced in size.
On the monetary front, the Central Bank has reduced its investments in foreign currencies as the financing of the fiscal deficit and the preservation of the riyal’s peg to the dollar are pressing issues at the moment. Foreign reserves at the Kingdom’s Central Bank remained ample in 2015 but registered a yearly drop of 16% to reach $616.42B in 2015. The Saudi Interbank Offer Rate declined from 0.9358 in 2014 to 0.8797 in 2015 as the market remains amply liquid. Moreover, loans to both the public and private sectors increased from $26.39B and $334.99B in 2014 to $33.33B and $334.99B in 2015.
At the end of the year 2015 the Tadawul All Share Index (TASI) closed at a level of 6,911.76 points, down by a yearly 17.06%. The total market capitalization totaled $421.10B, down by 12.9% from last year’s level. The total value of traded shares amounted to $442.83B compared to $572.40B in 2014. As for the volume of traded shares, it reached 65.99 billion shares in 2015 compared to 70.57 billion shares in 2014.
Four Initial Public Offerings (IPOs) took place during the year bringing the total number of listed companies to 171. The newly listed companies were Middle East Paper Company (Industrial Investment), Saudi Company for Hardware (Retail), Saudi Ground Service Company (Transport), Alandalus Property Company (Real Estate Development). 99.60 million shares were newly offered on the market with a total value of $1.11B in 2015.