LOAN DEMAND TO REMAIN STRONG: BMI
Despite the weaker macroeconomic environment, the demand for loans will remain strong in Qatar, driven by the government's financing need in preparation for the 2022 FIFA World Cup, a new report by BMI research has shown.
Despite the slowdown in loan growth since the second half of 2014, Qatar's commercial banks will “remain resilient” to the low-price environment and will outperform their Gulf Cooperation Council peers over the coming years, the report said. Though loan growth has shown signs of weakness, with growth slowing from 34.0% year-onyear in January 2016 to 9.2% in October, net claims on the public sector expanded by an average of 43.2% year-on-year in the first 10 months of 2016, pointing to rising borrowing needs to finance public investment.
However, it also mentions that the growing importance of the public sector in total demand for credit, combined with the ongoing liquidity squeeze and the low interest rate environment, will continue to weigh on profitability. On the other hand, demand for credit from semi-government institutions has sharply declined, reflecting cuts on secondary projects and the government's efforts to delegate some services to the private sector, BMI noted. Also, with deposits growing at a slower pace Qatar's high loan-to-deposit ratio compared to the rest of the Middle East will raise refinancing risks. This will not, however, threaten overall sector stability, given banks' success in raising money from abroad.