‘Kuwait most affected by US banking crisis repercussions’

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Battle for controlling stable deposits still open

KUWAIT CITY, March 26: The AlShall Consulting Company stated in its weekly report that with the recent US Federal Reserve hike in interest rates, the gap between the discount rate on the dinar and the basic interest on the dollar ranged between 0.75 and 1 percent, reports Al-Rai daily. AlShall added it does not believe that the increase in interest rates last week is aimed at curbing inflation only as in the previous eight cases, but rather fall under the objective of supporting confidence, as in the statement of the European Central Bank when it raised the interest rate of the euro by 0.5 percent.

The report pointed out that the target of the previous increases is to curb inflation, cool the heat of the labor market, and limit the growth of private consumption, all of which will be achieved by the repercussions of the recent banking crisis, while for one of the most important sources of inflation, which is oil prices, Brent crude lost about $ 4.9 a barrel between March 9 and March 22, that is, prices fell by about 6 percent, and “we may soon witness the beginnings of layoffs if economic growth slows down.” The report stressed that “the banking crisis on March 10 was not expected, but it did happen, and as a result of its occurrence, extraordinary emergency meetings were held in the United States, which included the American president and his team, the Congress, the Federal Reserve, the Federal Deposit Insurance Corporation, and all major financial companies that changed many previous convictions, and consumed all the weekend. Between 10 and 12 March this year, it took its decisions before opening the financial markets at the beginning of the week, followed by a similar effort in Switzerland the weekend that followed, and all the monetary and financial authorities of the world shared their communication and concern, except for Kuwait, which is not alone, and it is the most affected by the repercussions of the crisis. It was and continues to be completely without public administration.” The report noted that the rise in interest rates in the current circumstances has risks in two directions, the first is the possibility of curbing economic growth at a greater and faster rate than the target, which means entering an era of deeper and longer recession than is possible, and the second is the possibility of deepening the financial sector crisis.

The report added, “In order to deepen the crisis of the financial sector, from our point of view, there are two angles — the first angle is the possible expansion of default cases of medium and small banks, and their number in the United States is estimated at 190 banks, only 4 of which have been prolonged so far, with total assets of about $550 billion and total deposits of $317 billion.” The report explained that most of these banks suffer from an imbalance between their assets and liabilities, and most of their long-term investments are funded with short-term debts such as deposits and customer portfolios.

The report stated that the second angle is the cost of financing for borrowers, as the world’s total debt, sovereign and private, is at a record level, just under $300 trillion, or about 3.38 times the size of the global economy, and the high costs of servicing those debts may lead to a series of bankruptcies at the level of countries and major institutions, especially since it coincided with a major correction in the stock exchanges of the world, which is something that must be hedged and monitored continuously, “noting that” these risks may mean that the current increase may be the last, while the statements of the (federal) president about continuing to raise it if necessary. The US Treasury Secretary’s statement about excluding the guarantee of all uninsured deposits, fall within the affirmation of their confidence in the soundness of the banking sector’s conditions in order to enhance the confidence of its customers.

On the other hand, the AlShall report indicated that according to the latest detailed data issued by the Public Authority for Civil Information on population and employment statistics at the end of December 2022, the total population in Kuwait amounted to about 4.737 million people, a growth of 8 percent compared to the end of 2021 when it reached 4.386 million people (4.217 million people according to the Central Administration of Statistics), with an absolute increase during 2022 of about 351.2 thousand people, while the absolute decline for the whole of 2021 was about 285 thousand people, meaning that it recorded a decline of 6.1 percent during 2021 compared to a decrease of 2.2 percent. percent in 2020. The report pointed out that the total number of workers in Kuwait amounted to 2.858 million workers, or 60.3 percent of the total population, while this percentage for Kuwaitis reached about 31.7 percent of the total number of citizens, and the percentage of non-Kuwaiti workers out of the total non-Kuwaiti population reached about 73.8 percent.

The report explained that when compared to the end of 2021, we find that the percentage of Kuwaiti workers out of the total number of workers in Kuwait decreased from 18.1 to about 16.8 percent as in December 2022, and the percentage of female workers out of the total Kuwaiti workforce stabilized at 51.1 percent at the end of 2022 and the end of 2021, while the percentage of female employment out of the total employment in Kuwait was about 29.5 percent.

The report stated that the number of Kuwaiti workers increased by about 12 thousand workers, to reach approximately 481 thousand, up from about 469 thousand at the end of 2021, and the number of workers in the government reached about 380.6 thousand workers, or 79.1 percent of the total number of Kuwaiti workers, while Unemployment of Kuwaitis is believed to have increased to 26.1 thousand workers, or 5.4 percent of the total Kuwaiti workforce at the end of 2022, compared to 25.4 thousand workers, or 5.4 percent at the end of 2021.

In other news, it seems that the battle for controlling stable deposits is still open at the bank, and that there are banks that do not mind paying high interest to win them, even if their prices sometimes approach the pricing rates for the loans they grant to a wide segment of clients, especially the elite, reports Al-Rai daily. In this regard, the daily learned from informed sources that 13 banks recently participated in the bidding on two deposits offered by a government agency, one of which is 25 million dinars, and the other is 20 million dinars, noting that both are for a year, noting that among the competitors there were two branches of external banks operating In the local market, while two banks participated in the auction, one of them local and the other a branch of a Gulf bank, without offering any prices, as only their participation was recorded.

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