While many countries are seeing some signs of economic recovery, a decline in letters of credit (L/Cs) settled and bills received by Saudi banks is indicating that confidence has yet to return to the largest Gulf state.

Banks in Saudi Arabia are currently dealing with a debt crisis amongst family firms and remain cautious, thus virtually bringing credit growth in Saudi Arabia to a complete halt.

Stagnant growth

Official data shows that credit growth almost came to a halt in September, with bank credits at all but the same level as they were in August.

Bank credits reached 721.6 billion Saudi riyals (SR721.6 billion) in September compared with SR721.4 billion riyals in August, according to figures published by the Saudi Arabian Monetary Agency (SAMA).

L/Cs settled and bills received - indicating private sector imports financed through commercial banks - declined 19 per cent in September compared with August, according to SAMA's data.

Family debts

The Saudi credit market had been showing signs of recovery earlier this year. According to SAMA, in August bank credits were around 2 per cent higher than they were in July.

The Saudi banking sector is still coming to terms with the huge problems caused by billions of dollars of debts run up by two family mega-firms - Saad Group and Ahmad Hamad Algosaibi and Brothers.

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