Increasing Saudi Arabian household savings is crucial to increase long-term economic growth in the country, KPMG said in a recent report.
KPMG’s report outlined how Saudi Arabia can increase its level of savings to 10 percent, which is the international standard, and delved into the role household savings play in generating economic growth.
“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,” Abdullah Al Fozan, the chairman of KPMG Saudi Arabia wrote in the report.
The Saudi Arabian government has moved to support the goal of increasing household savings with the launch of the Financial Sector Development program (FSDP) under the umbrella of the Kingdom’s ambitious Vision 2030 plan.
To develop the financial sector, the FSDP has begun promoting financial planning and supports the Kingdom’s savings ecosystem.
“Increasing the total amount of savings held in savings products from SAR 315 billion (2016) to SAR 400 billion (2020), and increasing the number of available types of savings products from four (2016) to nine (2020) are some of the ambitious targets that the program has set out to achieve by 2020,” KPMG’s report read.
The FSDP is also seeking to raise Saudi Arabia’s household savings ratio, recorded at 1.8 percent in 2018 among Saudi nationals.
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KPMG suggested that the 1.8 percent figure is likely the result of several factors. In particular, the firm pointed to low levels of financial literacy among the Kingdom’s population as being a key factor in keeping savings rates low.
The government has already taken “some noteworthy measures and [is] making steady progress toward ensuring financial inclusion,” the report noted.
To support these initiatives, KPMG suggested introducing new policy initiatives, doubling down on financial literacy programs, and increasing the frequency of data published on household savings to allow for strategies to be developed faster.
“Nations that take conscious initiatives to encourage and nurture formal savings are more likely to witness higher levels of sustainable economic growth, human development and living standards,” Al Fozan added.