Kuwait credit grows 4.7% to KD 279 mil­lion in May

Kuwait Times - - BUSINESS -

Credit saw a healthy gain in May of KD 279 mil­lion, with growth im­prov­ing to 4.7 per­cent year-on-year (y/y). Both busi­ness and house­hold credit ac­counted for most of the healthy gain. Pri­vate de­posits saw a mod­er­ate in­crease. In­ter­est rates were steady in May. They have risen since even though the cen­tral bank opted to keep its key pol­icy rate un­changed fol­low­ing the June US Fed hike.

The gain in house­hold lend­ing was rel­a­tively good in May, though growth held steady. The sec­tor saw a gain of KD 75 mil­lion, with growth at 6.8 per­cent y/y. There was a no­tice­able net drop in con­sumer loans of KD 11 mil­lion, with loans con­tract­ing by 4.6 per­cent y/y. In­stall­ment loans con­tin­ued to be the only source of house­hold loan growth, gain­ing KD 90 mil­lion and record­ing growth of 8.3 per­cent y/y.

Busi­ness credit (ex­clud­ing non­banks) added KD 216 mil­lion, with growth im­prov­ing to 4.0 per­cent y/y. Most of the gains were in real es­tate, in­dus­try and trade. Other sec­tors were flat, though there was a no­tice­able KD 20 mil­lion de­cline in credit to the oil & gas sec­tor. De­spite this, credit to the sec­tor still dou­bled from a year be­fore. “Pro­duc­tive” busi­ness sec­tors (ex­clud­ing real es­tate and se­cu­ri­ties lend­ing) con­tin­ued to ex­hibit strong growth of 10.4 per­cent y/y.

Pri­vate de­posits saw mod­er­ate gains in May while an in­crease in govern­ment de­posits off­set re­cent de­clines. Pri­vate de­posits rose by KD 42 mil­lion, fol­low­ing de­cent gains in KD sight and sav­ings de­posits. These were off­set by de­clines in for­eign cur­rency and KD time de­posits. Money sup­ply (M2) growth re­mained sub­dued at 0.5 per­cent y/y, though M1 growth has been stronger at 9.8 per­cent y/y. Govern­ment de­posits rose by KD 172 mil­lion, with growth bounc­ing back to 13.4 per­cent y/y.

Bank­ing sys­tem liq­uid­ity was steady in May. Bank re­serves (cash, de­posits with the CBK, and CBK bonds) de­clined marginally by KD 46 mil­lion to KD 4.8 bil­lion or 7.8 per­cent of bank as­sets. This co­in­cided with no net is­suance of pub­lic debt dur­ing the month. Out­stand­ing do­mes­tic pub­lic debt in­stru­ments (PDIs) were steady at KD 4.117 bil­lion, or an es­ti­mated 12 per­cent of GDP.

In­ter­est rates were rel­a­tively steady in May, though they have risen since. The 3-month and 6-month in­ter­bank rates were up just 1-2 ba­sis points in May. Cus­tomer de­posit rates were also lit­tle changed. Rates have moved up since, fol­low­ing the Fed’s June rate hike of 25 bps, which saw the CBK in­crease its repo rate by 25 bps but keep its main pol­icy rate, the dis­count rate, un­changed. The move was an ef­fort to avoid pres­sur­ing do­mes­tic eco­nomic growth.

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