Super-sized spending in Saudi
Most families in Saudi are spending much more than they earn, accumulating huge debts as a result.
March 10, 2010 4:31 by Aarti Nagraj
A Booz & Company survey in May last year also found that Saudi consumers continued to spend despite the economic crisis. As many as 43 percent of the respondents reported spending more, while 36 percent maintained spending levels, and only 20 percent reduced spending.
Heberto Molina, senior associate at Booz & Company, told Kipp earlier this month that Saudi consumer confidence was not hit hard by the crisis, due to the belief that the government would intervene.
But for all this spending, where is the money coming from? The obvious answer is debt: as with the Saudi youth, the population as a whole is taking on more loans.
About 2.3 million people in Saudi Arabia had bank loans as of 30 May 2009, the Saudi Gazette reported. Out of that figure, consumer loans amounting to SAR275 billion, represented 80 percent of the total value.
“Banks encourage personal loans because they bring huge profits,” Essam Mustafa Khalifa, a senior marketing planner and member of the Saudi Economic Society told the paper at the time. “If consumer loans keep growing at this rate, the banks will turn into installment companies like cars firms,” he added.
“People who have trouble obtaining personal loans turn to credit cards which are usually used irrationally, resulting in the accumulation of debt,” he said, adding that the loan figures were “a dangerous indication” of the huge financial obligations on individuals.