Saudi Arabia's strong economic performance is behind a surge in letters of credit (L/Cs) according to one of the kingdom's largest banks.

National Commercial Bank (NCB) says L/Cs have soared to one of their highest levels for several months, and the bank expects record high values this year.

Strong economy

Saudi Arabia, the largest economy in the Middle East, achieved one of its highest annual growth rates in 2011 of 6.8 per cent.

This was due to strong oil prices, relatively low exposure to global turmoil and buoyant business activity, according to an NCB report.

Accelerated growth

The bank said in its report that it views L/Cs as a major bellwether for private sector performance.

According to the NCB report, L/Cs "accelerated to record exceptional levels during the first two months of 2012,"

Record settlements

The report showed that L/C settlements reached a total value of 41.3 billion Saudi riyal (US$11 billion) during January and February.

This represented growth in value of around 26.6 per cent over the same period last year.

Growth areas

The bank says a massive 70.1 per cent hike in L/Cs for food grains was the main area of growth.

Strong growth was also seen in L/Cs servicing deals for building materials and machinery, according to the NCB report.

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