Trade surplus narrows for a third straight month as exports fall

Saudi Arabia’s merchandise trade surplus narrowed for a third straight month in August, falling 21% y-o-y to SAR 15.6 bn, after declines of 25% in July and 10% in June, according to Gastat data (pdf). Merchandise exports fell 11.5% to SAR 87.2 bn, while imports declined 9.1% to SAR 71.6 bn.

Oil export value fell 12.5%, trimming oil’s share of total merchandise exports to 70% from 70.8% a year earlier. Non-oil exports, including re-exports, also fell 9.1% y-o-y, with re-exports down 34% on a 63.6% decline in machinery, electrical equipment, and parts. Non-oil exports covered 36.5% of imports, essentially flat y-o-y.

OUR TAKE- Prices moved sharply the other way over the same period, which puts the weight of the decline on volumes. Brent averaged USD 91 in August against roughly USD 67 a year earlier, so a 12.5% drop in oil export value implies crude and product volumes are down on the order of 30% y-o-y. Rerouting is doing more to trade flows than the headline surplus figure shows, meaning a further price recovery won’t repair the surplus while shipments stay constrained.

Plastics, rubber, and related products remained the largest non-oil export category at 22.6% of the total, rising 7.5%, while chemical products and related industries followed at 20.9%. On the import side, machinery and electrical equipment made up the largest share of imports at 26.2% despite a 19.8% y-o-y decline, followed by chemical products at 9.6%, up 2.7% y-o-y.

The UAE was the leading destination for Saudi merchandise exports, accounting for 11.4%, followed by South Korea at 11.2% and India at 8.4%. Japan, meanwhile, slipped from the top spot the previous month to fifth place among the Kingdom’s export destinations in August. China remained the largest source of imports at 21.9%, followed by the US at 8.4% and Egypt at 5.8%.