NBK ECONOMIC REPORT Kuwait credit growth hits post-2009 record of 8.7%
August saw a healthy gain in credit, with growth improving to 8.7 percent year-on-year (y/y), its best pace since mid-2009. Credit rose by KD 276 million, on a notable increase in household loans and business credit. Meanwhile, private deposits saw another decline during the month, though an increase in government deposits helped offset some of that decrease. Domestic interest rates held steady throughout the month.
Growth in household lending was strong in August, adding a net of KD 113 million, though growth continued to moderate. Growth slowed to 8.9 percent y/y, its slowest pace since late 2011. The gain was well above the monthly average increase of KD 55 million recorded since November 2015.
Lending to nonbank financial companies saw a small net gain and maintained positive growth compared to a year before. Sector debt added KD 4 million in August, with growth picking up to 4.4 percent y/y. The sector appears to have largely completed deleveraging that began in the wake of the 2008 financial crisis.
All remaining credit rose by KD 160 million with growth improving to 8.9 percent y/y. Growth in lending to this segment has accelerated to its most rapid pace since the financial crisis. The largest gains were in the oil & gas sector and lending for the purchase of securities, adding a combined KD 119 million. Industry and construction also saw some decent gains. Declines were visible in the trade and real estate sectors; growth in the latter has been flat compared to the previous year for several months now.
Private deposits were down in August on the heels of a large drop the month before. Despite the KD 281 million decline, broad M2 money supply growth improved to 2.8 percent y/y on base effects. Narrower M1 money supply growth also rose to 1.8 percent y/y. Drawdowns were visible across the board, with the largest decline coming from KD time deposits, down KD 122 million.
An increase in government deposits helped offset some of the decline in private deposits. The month saw a gain of KD 94 million, with growth at 27 percent y/y. Government deposits have grown notably over the last twelve months, adding KD 1.7 billion, at a time when private sector deposits have been under pressure.
Banking system liquidity decreased in August, but maintained a healthy level. Bank reserves (i.e. cash, deposits with the CBK and CBK bonds) contracted by KD 186 million to KD 5.6 billion or 9.3 percent of total bank assets. The decrease was predominantly in time deposits with the CBK and coincided with a KD 381 million drawdown in CBK foreign reserves, which decreased to KD 7.7 billion. Meanwhile, net domestic debt issuance was limited in August, with outstanding public debt instruments (PDIs) rising by a mere KD 30 million to KD 2.57 billion. Interest rates have been relatively steady. The 3month Kuwait interbank offered rate (Kibor) added 6 basis points (bp) in August to reach 1.56 percent. Rates have been relatively steady since (Chart 5). Meanwhile, customer deposit rates appeared to ease during August, declining by 1-2 bps for various maturities.
Iran’s current oil output is almost 4 million barrels per day (bpd), and its exports have reached 2.4 million bpd, the managing director of the National Iranian Oil Company (NIOC) was quoted as saying by the oil ministry’s news agency yesterday. “The OPEC meeting is close and we won’t give up on regaining our share (of the oil market),” Ali Kardor was quoted as saying by SHANA.
OPEC oil price down 19 cents to $47.04 pb
Price of OPEC’s basket of crudes went down 19 cents last Friday settling at $ 47.04 per barrel, compared to $47.23 pb last Thursday, according to OPEC’s bulletin yesterday. The 170th (Extraordinary) Meeting of the OPEC Conference had opted for an OPEC-14 production target ranging between 32.5 and 33.0 million barrel per day, in order to accelerate the ongoing drawdown of the stock overhang and bring the rebalancing forward. The average annual rate of OPEC’s crude of the past year stood at $49.49 per barrel.
Egypt’s GDP growth up to 4.3% in 2015/16
Egypt’s gross domestic product (GDP) growth for 2015/16 climbed to 4.3 percent from 4.2 percent in the previous year, Egypt’s Prime Minister Sherif Ismail told Reuters yesterday. The budget deficit widened to 12.1 percent, Ismail said, from 11.5 percent a year earlier. The prime minister’s GDP figure differed from a report from two finance ministry officials earlier yesterday that Egypt’s GDP grew 3.8 percent in 2015/16. Both figures were lower than the targeted growth of 5 percent for the year.
Sharjah plans seismic onshore oil and gas survey
The emirate of Sharjah, one of the United Arab Emirates, will conduct a 3D seismic onshore survey of about 500 sq km (195 sq miles) of its territory in search of deep oil and gas reservoirs, Sharjah National Oil Corp said yesterday. Most of the area has not previously been covered by 3D seismic surveys, Sharjah National Oil Corp said in a statement, adding that the survey is expected to be completed by the end of December. Oil was discovered in Sharjah in the 1960s and commercial production began in 1974. Production increased with the discovery of two fields in 1980 and 1982.