Saudi Arabia’s external trade shows signs of waning

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The Kingdom’s external trade continues to show signs of waning as nonoil exports tumbled by 20.6 percent Y/Y in July, recording SR14.5 billion, the lowest monthly figure YTD. Imports also nose-dove in value terms, slashing 12.2 percent Y/Y at SR44.6 billion, the lowest monthly total since October 2012, according to a report by the National Commercial Bank.
The Kingdom’s efforts to diversify its revenue base via nonoil exports is one of the main strategic moves that become increasingly important during oil crises. Therefore, the surge in nonoil exports in the past years set a high base for growth where it becomes increasingly challenging to maintain the upward momentum. In addition, the Kingdom has partnered throughout the years with many of the world’s largest industrial economies.
Some of whom, like China, experienced a market bonanza in 2010 and 2011, rejuvenating manufacturing activity, and thus demand for the Kingdom’s exports as input. However, as a slowdown ensued in the following years, the trading partners reduced their demand for the Kingdom’s nonoil exports. The Kingdom’s lower revenues from oil have also had an impact on its expenditure on imports by deferring some mega projects it previously had been working on.
By weight, overall non-oil exports weighed 3.9 million tons in July, falling by 8.3 percent Y/Y. The weight of imports have also declined by annualized comparison, sliding 23.1 percent Y/Y at 5.3 million tons.
The main export categories remain plastics and chemical products, which respectively account for 33.8 percent and 31.8 percent of nonoil exports, registered double-digit de- clines of 18.5 percent and 25 percent.
The large exposure these categories hold to the oil market from the supply side, and to manufacturing from the demand side inflicted a double whammy to the trade of these goods. In contrast, base metals, which account for 7.4 percent of the monthly nonoil export return inched up by 1.4 percent in July.
The NCB report said main destinations for Saudi nonoil exports are the UAE, China, and Singapore. The UAE’s share of the monthly total represents 14.1 percent at SR2.1 billion, thus inching down by 1.1 percent Y/Y.
Nonoil exports to China tumbled by 18.7 percent compared to last year posting SR1.95 billion. Despite the large annualized decline, China’s share constitutes a hefty 13.5 percent of the monthly nonoil exports. Singapore came as the third largest trading partner with the Kingdom. Its share of nonoil exports was around 5.5 percent at SR804 million in July, therefore declining by around19.2 percent Y/Y.
On the import side, the NCB report said, machinery and electrical equipment which account for 27.9 percent of the import bill at SR12.4 billion slid by 2.8 percent Y/Y.
Moreover, transport equipment which make up around 17.5 percent of the value of imports dipped 6 percent compared to last year at SR7.8 billion. A more sizable plunge in base metal imports took place in July, pulling its imports down by 26.6 percent to SR4.6 billion. Around 15.3 percent of July’s imports in value terms originated from China, valued at SR6.8 billion. By annual comparison, Chinese imports to the Kingdom were trimmed by as much as 5.4 percent and yet the country still maintained its rank as the Kingdom’s biggest trading partner. US imports have been garnering much attention by sometimes overtaking China by the value of trades. US imports to the Kingdom make up 12.9 percent of July’s total; however, compared to the same month last year, they dwindled by 15.1 percent at SR5.8 billion. To the contrary of the previous countries’ figures, imports from Germany upturned by 4.6 percent Y/Y, recording SR3.3 billion, thus accounting for about 7.4 percent of the import bill.

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