An economic study called for the need to raise the savings rate in Saudi Arabia to support economic growth, pointing to the importance of promoting a culture of savings through behavioral experiences and the establishment of a supervisory body to monitor progress in implementing savings performance.
The study issued by the KPMG consulting company on “Analysis of Household Saving in the Kingdom of Saudi Arabia” highlighted the link between household savings’ rate and the state’s economic growth, indicating the need to improve the existing rate to the global level of 10%, which is recognized as the lowest level to guarantee long-term financial stability.
The report showed how some countries, by adopting innovative solutions and policies, have instilled a savings mindset among their citizens.
“Household savings and investments are two vital cogs in the proper functioning of an economy. An acceptable rate of economic growth typically requires an adequate rate of investment and therefore, a satisfactory supply of savings,” said Abdullah Al Fozan, Chairman of KPMG in Saudi Arabia.
He continued: “Due to the key role household savings play in the economic development of a country, Saudi Arabia, as part of the Saudi Vision 2030 programs, launched the Financial Sector Development program (FSDP).”
He explained in the report that one of the key objectives of FSDP was to “develop a diversified financial sector to support the development of the national economy and stimulate savings.”
Al Fozan underlined that the unavailability of an adequate number of savings products in the market and a low level of financial literacy compared to other countries such as Australia and Germany, encompass some of the factors behind Saudi Arabia’s low household savings rate.
“The country’s household savings rate, as of 2018, is significantly low compared with that of other G20 countries including Germany (11 percent), the US (8 percent) and Mexico (10.8 percent),” he remarked.
According to the study, one of the major objectives of FSDP is to “promote and enable financial planning by driving the expansion of savings products available in the market, strengthening the savings ecosystem, and enhancing financial literacy.”
