Kuwait’s credit growth muted in H1

Kuwait’s credit growth muted in H1

KUWAIT: Domestic credit growth remained weak in Q2 at 0.2 percent q/q, translating into a YTD increase of 0.8 percent (+3.3 percent y/y). Higher interest rates, banks’ lower price competition in terms of retail lending, and normalizing growth following a strong 2022 are some of the factors behind the weakness this year. Looking ahead, while a more favorable political backdrop and ongoing momentum in project awards may support business credit we note that, historically, business credit growth has been much weaker in the second half of the year than in H1. Business credit increased by a limited 0.4percent q/q translating into YTD growth of 1.6 percent.

This follows a strong 6.8percent growth in 2022, the fastest annual expansion since 2013. The trade sector was, by far, the main driver of growth in Q2, increasing by a solid 6.3percent q/q while “other services” and “oil/gas” were the weakest, dropping by 3percent and 2.1percent, respectively. From a YTD perspective, “trade” and “construction” are the fastest growing, together accounting for 84 percent of the total increase in business credit. The particularly interest rate sensitive “real estate”, the sector’s heavyweight with a 41 percent share, is up by 0.9 percent YTD (+5.6 percent in 2022)