Saudi Arabia’s economic liquidity has reached a new peak, with a growth rate of 9% on an annual basis, totaling SR2,898,706 million by the end of the second quarter of 2024. This marks an increase of SR238,150 million from the same period in 2023, when it amounted to SR2,660,556 million. The liquidity levels reflect the money supply in its broad and comprehensive concept (M3), as per data from the Saudi Central Bank’s monthly bulletin for July 2024. Liquidity levels grew by 3% on a quarterly basis, reaching SR2,869,788 million by the end of July 2024.
The increase in liquidity levels is a strong indicator of economic and commercial health and plays a crucial role in achieving positive rates in the economic development process. The four components of money supply (M3) include demand deposits, time and savings deposits, other cash deposits, and cash in circulation outside banks. Demand deposits, which make up 49% of the total money supply (M3), recorded a value of SR1,421,423 million by the end of the second quarter of 2024. Time and savings deposits, the second largest contributor at 31%, totaled SR903.712 billion. Other cash deposits and cash in circulation outside banks also contribute significantly to the total money supply.
Domestic liquidity (M1) includes cash in circulation outside banks and demand deposits. M2 expands on M1 by adding time and savings deposits. The broadest definition, M3, encompasses M2 and other quasi-cash deposits such as residents’ deposits in foreign currencies, deposits against documentary credits, outstanding transfers, and repurchase (repo) operations conducted by banks with the private sector. Achieving growth in these various components of money supply indicates a healthy financial system.
The positive growth trend in economic liquidity in Saudi Arabia is a promising sign for the country’s overall economic development. By maintaining strong liquidity levels and ensuring a steady increase in money supply components, Saudi Arabia is well-positioned to support ongoing economic activities and commercial transactions. The diverse nature of money supply components, including demand deposits, savings deposits, and quasi-cash deposits, ensures a well-rounded financial environment that can effectively meet the needs of various sectors in the economy.
As Saudi Arabia continues to focus on economic diversification and growth, the significance of maintaining stable liquidity levels cannot be overstated. By monitoring and analyzing the various components of money supply, policymakers and financial institutions can make informed decisions to support economic stability and growth. The consistent increase in liquidity levels, as evidenced by the latest data from the Saudi Central Bank, indicates a positive trajectory for the country’s economic landscape, setting the stage for continued progress and development in the coming years.
In conclusion, the growth in economic liquidity in Saudi Arabia, as evidenced by the latest data, reflects a positive trend in the country’s financial health. By focusing on maintaining strong liquidity levels and supporting the various components of money supply, Saudi Arabia is poised to sustain economic growth and development. The diverse nature of money supply components, including demand deposits, savings deposits, and quasi-cash deposits, ensures a robust financial system that can support the country’s economic objectives. As Saudi Arabia continues to prioritize economic diversification and growth, ensuring stable liquidity levels will be essential for driving ongoing prosperity and success in the region.
