Report says rising government borrowing threatens to 'crowd out' private sector
Growth in Kuwait’s banking sector will be slower than in recent years due to the impact of lower oil prices and production cuts, a study has claimed.
The outlook for the Kuwaiti economy is “fairly weak”, with negative GDP growth of 1.1 percent predicted as oil production falls by 4.5 percent, according to the analysis by BMI Research.
This is having a negative impact on the banking sector, it said, with client loan growth averaging just 3.4 percent year on year during the seven months from January to July, compared to 7.2 percent in over the corresponding period in 2016.
As a result, the banking sector is expected to become increasingly reliant on lending to the government as it presses ahead with capital spending despite fiscal cuts, BMI said.
The bond portfolio in Kuwait’s banking sector averaged growth of 54 .5 percent over January to July, and has nearly doubled as a percentage of total assets over the past two years, to 11.9 percent.
Rising government borrowing could “crowd out” further growth of the private sector, BMI warned.
Client deposits is expected to see only modest growth at 3 percent in 2018 and 4 percent in 2019, according to the report, compared to average 4.8 percent growth in 2016.
A return to oil production growth in 2018 will bolster Kuwait’s economy once more, with GDP set to expand by 3.5 percent in real terms, the report concluded.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.