Non-oil private sector exports financed through the 10 Saudi commercial banks contracted last year by 5.9 per cent.
The settled letters of credit amounted to SR10.95 billion ($2.92 billion) by the end of 2002 compared with SR11.63 billion during the same period the year before.
This decline came on top of an 11.4 per cent drop in the total value of export financing in 2001, after a six-year peak of SR13.13 billion in 2000. Meanwhile, the first three months of this year assumed a continued declining trend. During this period settled letters of credit totaled SR2.72 billion, a 3.16 percent decline over their level during the same three-month period last year, said Said Al Shaikh, chief economist at the National Commercial Bank in Jeddah, who was quoted by the Arab News.
Al Shaikh said the sluggish world economic recovery, led by the US, continued to dampen demand for Saudi non-oil exports, especially in chemicals and plastics. These two commodities make up over 28 per cent of total export financing.
As classified by the Saudi Monetary Agency (Sama), export financing is divided into three broad categories. The smallest category is the financing of agriculture and animal products constituting less than two per cent of total export financing. This segment increased by 37.2 per cent to SR187 million last year from SR136 million in 2001.
However, during the first quarter of this year, financing of agricultural exports fell significantly by 78 per cent compared with the same three-month period of 2002.
Meanwhile, the second major component of commercial banks’ export financing - chemicals and plastics - averaged about 28 per cent of total financing last year. This was a decline by 1.3 per cent to SR3.15 billion last year compared with SR3.19 billion in 2001, said the report.
This trend continued during the first three months of this year, with settled letters of credit in this category falling by 1 per cent to SR907 million, compared with SR916 million during the same quarter of 2002.
Financing of other industrial goods, representing about 70 per cent of total financing, fell significantly by 8.3 per cent to SR7.62 billion last year compared with SR8.31 billion in 2001. This was mainly due to lower demand for Saudi industrial products on the international market. This segment includes numerous manufacturing goods such as base metals, building materials and machinery among other industrial products.
However, this category edged slightly higher by 0.29 per cent to SR1.79 billion during the first three months of this year, compared with SR1.74 billion during the same period in 2002.
In terms of geographical distribution of Saudi exports financed through commercial banks, the Gulf Cooperation Council (GCC) represented about 38 per cent of total export financing last year.
However, the total value of financing for exports to GCC countries fell by 17.25 per cent to SR4.13 billion last year, compared with SR4.99 billion in 2001. Despite the GCC customs union, formed at the beginning of this year, financing of exports destined for GCC countries fell by 16.35 per cent to SR943 million during the first quarter of this year compared with SR1.13 billion during the same three-month period in 2002.
