Kuwait's Q3 Credit Growth Shows Resilience Amid Economic Recovery

Kuwait, 5 November, 2024 : Kuwait has seen a boost in business and household credit growth in the third quarter of 2024, despite overall domestic credit growth remaining modest at 0.4%, resulting in a year-to-date increase of 2.5%. The headline growth was impacted by a significant decline in lending to banks and financial institutions, which fell by 12% quarter-on-quarter. However, business and household lending showed robust performance compared to the previous quarter.

Business credit increased by 1.1% quarter-on-quarter, bringing the year-to-date growth to 3.4%. Traditionally, the fourth quarter experiences weaker business credit due to heightened repayments and write-offs, but the onset of an interest rate-cutting cycle and accelerated project awards may positively influence credit growth. Notably, the construction sector led business lending, rising 4.2% quarter-on-quarter and 16% year-to-date, while the oil and gas sector lagged, declining 9% year-to-date.

Household credit also exhibited strength, with quarterly growth reaching its highest level in seven quarters, although year-on-year growth remains limited to 2.5%. The annualized growth rate over the past three months stood at a stronger 4.3%. The higher interest rate environment had previously dampened household credit demand, and future rate cuts are expected to spur growth.

In terms of deposits, resident deposits increased by 2.5% quarter-on-quarter, resulting in a year-to-date increase of 3.7%. Private-sector deposits, which constitute 77% of total deposits, grew by 4.3% year-to-date. While government deposits have seen consistent growth, public institution deposits remain volatile. The trend in private-sector deposits showed time deposits outpacing current and savings accounts, although the growth rate differential has narrowed compared to earlier peaks.

Finally, following a 50 basis point rate cut by the U.S. Federal Reserve in September, the Central Bank of Kuwait reduced its discount rate by 25 basis points. Market expectations for further U.S. rate cuts have softened, aligning with the Fed's projections, which could support ongoing credit growth in Kuwait.

Source : www.zawya.com