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.

Qatar Today - - BUSINESS > BANK NOTES -

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.

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