Saudi Arabia’s economy will grow by at least 4.5 per cent in 2011, after growth estimated at 3.8 per cent in 2010.

“I would not be surprised if growth is 4.5 per cent or more,” said Mohammed al-Jasser, governor of the Saudi Arabian Monetary Agency (Sama), speaking on the sidelines of the Global Competitiveness Forum in Riyadh. He added that growth in the non-oil sector would be between 4-4.5 per cent.

Credit growth, which has remained muted in much of the Gulf following the global financial crisis, is due to expand in 2011, he says. The latest credit growth figures show that, in November, the loan to deposit ratio rose to its highest level in 11 months, as banks grew deposits but remained unwilling to deploy new loans.

In addition to an improving credit situation, Al-Jasser also said banks would benefit from declining provisioning levels in 2011. “There are clear signs that the trend is for provisioning to come down, and that was already shown in the fourth quarter figures for the banks,” he said. “Now capital adequacy levels are high and the quality of the loan portfolios is good. Banks in Saudi Arabia are prudent and conservative.”

Al-Jasser also said the kingdom would continue to invest in countries with the potential for high levels of food production to combat global food inflation.

This would be the main method used to tackle domestic inflation as prices rises “all depend on food, inflation is not a monetary phenomenon in Saudi Arabia”, said Al-Jasser.