As of August 2023, liquidity in Saudi Arabia’s economy reached a record high, surging by 9.59 percent year-on-year and 0.56 percent month-on-month to reach SAR2.674 trillion ($712 billion).
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Based on the monthly statistics from the Saudi Central Bank (SAMA), liquidity has experienced continuous year-on-year growth for 60 consecutive months, starting from August 2018, marking five consecutive years of expansion. On a monthly basis, there has been a slight increase in liquidity after a decline in the previous month.
Since the initiation of Vision 2030 in April 2016, Saudi Arabia’s liquidity has witnessed a notable increase of 50.22 percent. The liquidity level has risen from SAR1.78 trillion at the end of April 2016 to SAR2.67 trillion at the end of August 2023.
The annual increase in the money supply can be attributed to a widespread growth in its components, with the exception of on-demand deposits, which experienced a decline. However, time deposits and savings witnessed a substantial rise of 54.15 percent.
The significant growth in liquidity can be primarily attributed to a rise of SAR284.37 billion. In the month of August, time and savings deposits accounted for 30.27 percent of the total, marking the highest representation since May 2010 when it reached 30.42 percent.
Following 11 interest rate hikes by SAMA in the past two years, there has been an increase in time and savings deposits. These deposit types are considered secure and low-risk investment instruments, ensuring a fixed return for a specified duration against deposits made in commercial banks.
Vital role
The expansionary nature of monetary policy, marked by an increase in overall monetary supply and a decrease in interest rates, plays a vital role in stimulating aggregate demand. Consequently, this supports the growth of GDP and creates more employment opportunities, ultimately resulting in a decrease in unemployment rates and facilitating economic expansion.
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