Kingdom’s import bill falls 23.9% to SR43bn in June

Non-oil trade in the Kingdom continued to contract annually during the month of June on the back of an unfavorable business cycle. 

Lackluster global inflation stemming from low energy prices permeated most trade goods, leading to less non-oil exports and imports, in value terms, than last year, according to the National Commercial Bank’s Saudi Economic Review for September released on Wednesday.
Recurrent failure to curb the global oil supply glut is feeding into expectations of persistently low energy prices which are factored into prices of goods and services.
The top two categories, plastics and chemical products, account for almost 60 percent of non-oil exports by value, enough weight to swing bottom-line figures. Ostensibly, due to these exports being essentially an extension of the oil production chain, there exists a strong correlation between the value of non-oil exports and oil prices. 
In June, exports posted a value of SR14.3 billion, down by 10 percent while the import bill for the same month amounted to SR43 billion, tumbling by 23.9 percent. Exports of plastics made up around 30.8 percent of the monthly total, valued at SR4.4 billion, thus declining by 10.3 percent. Exports of chemical products recorded a 23.6 percent decline compared to last year after posting SR4.1 billion. 
Furthermore, exports of base metals which account for 7.8 percent of the monthly total registered SR1.1 billion, plummeting by 19.2 percent. 
By destination, the UAE accounted for 16.4 percent of the exports at SR2.2 billion. Compared to the same period last year, exports to the UAE surged by 15.5 percent in contrast to China and India which declined by 18.9 percent and 17.8 percent, respectively. Exports to China were valued at SR1.5 billion while exports to India recorded SR908 million.
On the imports side, the monthly import bill reflected SR43 billion, down by 23.9 percent affected by the government’s cost-reducing measures. The trickle-down effect yields lower construction activity, in turn, reducing demand for machinery and transport equipment.
The bulk of imports consist of machinery and electrical equipment at 24.3 percent, transport equipment at 21.2 percent, and chemical products at 9.5 percent. The value of imported machinery and electrical equipment declined by 35 percent after posting SR10.5 billion, marking eight months of consecutive annual declines. Imports of transport equipment inched up 0.2 percent, posting SR9.1 billion, while imports of chemical products tumbled 18 percent at SR4.1 billion.
Imports by country indicate that China came as the top trade partner in June despite declining by 21.1 percent at SR8.5 billion, accounting for 15.6 percent of the monthly bill. Imports from the US amounted to SR6.7 billion, down by 16.4 percent, whereas imports from Germany tumbled by 34.8 percent to SR2.5 billion. 
The situation of private sector imports financed through banks as reflected by the value of letters of credit (LCs) is in line with the general trend of moderating economic activity.
The month of July marked the ninth consecutive annualized decline, standing at a monthly total of SR13.6 billion. Compared to July of 2015, settled LCs dropped 23.6 percent due to lesser LCs of motor vehicles, machinery, and building materials.
Motor vehicle LCs dwindled by 42.8 percent, standing at SR2.3 billion, while machinery LCs declined by 42.6 percent to SR718 million. 
Furthermore, declining government projects prompted private contractors to lessen their demand for building materials as their LCs fell by 17.3 percent to SR1.3 billion.

Source: Arab News