Kuwait Times

Published Date: December 17, 2008

RIYADH: Saudi Arabia's central bank yesterday slashed its key interest rate by 0.5 percent as the world's largest oil exporter feels the repercussions of the global economic slowdown, bankers said. The Saudi Arabian Monetary Agency (SAMA) reduced its repurchase rate to 2.5 percent from 3.0 percent, the fourth cut in its benchmark rate since October. The move comes ahead of a meeting by the US Federal Reserve on Tuesday expected to further reduce US interest rates, and as Saudi Arabia's economy slows on the
back of a sharp fall in oil prices.

Meanwhile, Saudi Arabia's oil export revenues could fall 41 percent to $172 billion in 2009 due to lower production and prices, a local investment bank said in a research report. This will result in the kingdom posting real economic growth of 1.5 percent in 2009, which would be the lowest since 2002, Jadwa Investment said in the report, a copy of which was obtained by Reuters yesterday. The world's largest oil exporter's average daily production is expected to shrink 8.7 percent to 8.4 million barrels per
day (bpd) in 2009 down from an average 9.2 million bpd in 2008, it said.

Lower oil prices and production and an increase in domestic consumption will drive down oil export revenues to $172 billion riyals in 2009 from an expected $292.7 billion in 2008, it said. Jadwa based these estimates on an average price for a Saudi barrel of oil of $65.8 in 2009, down from $95 in 2008, both of which are well above current international prices. The lower oil export revenues will cause the kingdom's current account surplus to fall to 8.4 percent of 2009 GDP, down from 32.6 percent of GDP thi
s year, Jadwa said. - Agencies