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Kuwait: Credit growth likely at eight per cent in 2013 despite weaker November

January 21, 2014

NBK's latest Economic Update says credit growth in Kuwait moderated due to a weaker November, but remained on track to record solid growth in 2013. The weaker November gain in credit was not surprising as it followed three months of strong growth. The non-financial business sector was particularly weak during the month while consumer lending growth continued to moderate. Bank credit was up a modest KWD 81 million on the month, with year-on-year growth easing to 7.3 per cent. Despite this, bank credit continued to record its strongest performance since 2010, with a net increase of KWD 2.1 billion thus far in 2013. We still expect the year to record growth closer to eight per cent, in part due to base effects from a weak figure in December 2012 . The non-financial business sector experienced a modest month following its very strong performance in October. November's gain was a smaller KWD 41 million , with year-on-year growth slipping to 6.7 per cent. Gains in the trade and industry sectors helped offset a drop in the real estate sector (-61 million). Credit for the purchase of securities saw another good month ( +KWD 60 million ) while the non-bank financial sector remained in deleveraging mode ( -KWD 36 million ). Household credit, which continued to see the most rapid growth, saw another relatively weak month adding KWD 75 million in November. The figure was lower than the KWD 100 million monthly average seen in 2013 to-date. Growth in household credit eased for a second consecutive month, growing by a still healthy 15.9 per cent. Private sector deposits added KWD 249 million in November. The month saw solid increases in dinar deposits ( +KWD 370 million ), which countered a KWD 121 million decline in foreign currency deposits. Private sector deposit growth has outpaced growth in credit in 2013, which has pushed the average loan-to-deposit ratio down to 94 per cent compared to 97 per cent a year ago. As a result, broad money supply (M2) expanded by KWD 232 million during the month, with year-on-year growth accelerating to 11.1 per cent. The narrower measure (M1) increased by KWD 142 million , but saw growth ease to 18 per cent. Deposit rates on dinar time deposits remained mostly unchanged though the 1-month deposit rate has been edging slowly higher. The average rate on the 1-month time deposit gained around 0.8 basis points over the last few months to reach 0.565 per cent. 3-month and 12-month deposits paid 0.74 per cent and 1.12 per cent, respectively, mostly unchanged from last month.

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Source: CPI Financial

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