Kuwait’s credit growth slows in Q1

Kuwait’s credit growth slows in Q1

KUWAIT: Domestic credit started the year on a relatively weak note, increasing by 0.6 percent q/q in Q1 2023, cutting the y/y increase to 5.1 percent through March. Higher interest rates, banks’ lower price competition in terms of retail lending, and normalizing growth following a very strong 2022 are some of the factors behind the softening growth so far this year.

Business credit increased by 1.2 percent q/q, cutting the y/y increase to 4.2 percent through March. This follows a strong 6.8 percent growth in 2022, the fastest annual expansion since 2013. Growth of the various sectors differed markedly with the particularly interest rate-sensitive real estate, in addition to oil/gas, being broadly flat in Q1 2023.

On the other hand, industry, construction and other services recorded decent growth of around 3 percent q/q. Excluding real estate and oil/gas, business credit would have increased by 2.3 percent q/q (+8 percent y/y). Looking ahead, business credit dynamics may remain as seen so far this year, especially given the weaker oil price. In contrast, a more optimistic scenario could unfold driven by the major improvement in project awards so far this year, the end (or close to) of the rate-hiking cycle giving corporates more visibility