Riyadh: A sharp drop in lending by foreign banks in Saudi Arabia is not likely to stifle credit growth in the world's top oil exporter as local lenders and government funds have been stepping in, bankers and analysts said.
"If you look at the fourth quarter of last year, which is the latest data we have, it suggested foreign banks' lending to Saudi Arabian entities fell $12 billion (Dh44 billion) quarter-on-quarter," said Daniel Cowan, an analyst at Morgan Stanley, citing data from the Bank for International Settlements (BIS).
"That was the quarter when the liquidity issues hit European banks and it was an immediate reaction to that," he said.
Saudi Arabia has only a limited exposure to European banks, which are strained by the continuing debt crisis, government officials and bankers said.
Moreover, generous public spending, which the finance ministry expects to be higher than its original plan of 690 billion riyals (Dh675 billion) in 2012, is helping to compensate for any cuts in foreign credit lines.
It also prevents a repeat of a 2009 scenario when the global crisis brought Saudi lending growth to a halt.
"We have seen some slack being taken by other entities, government funds, we have seen export credit agencies fill the gap as well. So it's not hopeless. Some Saudi banks have a bigger role today in taking up a bigger piece of the pie," Cowan said.
Bank lending in the Opec member's private sector jumped 12.6 per cent in March from a year ago, the fastest clip in three years, Saudi central bank data show.
The International Monetary Fund said last August it expected Saudi Arabia's credit growth rate to reach 16.8 per cent on average in 2012, below 27.1 per cent seen in 2008.
