Loans expected to increase at the fastest rate since 2008
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KUWAIT CITY, Dec 10: Fitch Solutions expect loan growth in Kuwait to be strong for now and over the years, indicating that credit growth in October was 8.6 percent on an annual basis, which is higher than its expectations, which prompted it to raise its expectations for 2022 from 7 percent on an annual basis to 8.1 percent, reports Al-Rai daily. Fitch’s new forecasts indicate that after a 2.2 percent contraction on an annual basis in 2021, Kuwaiti credit growth will expand at its fastest pace since 2008, noting that credit growth had accelerated in the first ten months of 2022, and the fastest growth came against the backdrop of reopening the economy, and strong demand from the oil and gas sector, the state has revived projects to boost oil production.
For the next year, Fitch Solutions expects credit growth to decline to 5.1 percent year on year for 3 reasons – the direct primary effects from the reopening of the economy in 2022 indicate that the levels of credit growth for this year will not be repeated; the slowdown in oil production growth due to the extension of OPEC+ supply cuts will weaken the demand for credit from the oil and gas sector and the prolonged period of tightening monetary policy due to the cycle of raising the discount rate by the Central Bank of Kuwait will also affect credit growth, despite the widespread use of a fixed-interest lending policy in the country.
However , the agency believes that credit growth in 2023 will remain above the 2010- 2019 average of 4.1 percent, mainly due to increased government spending as a result of continued high oil prices. Fitch Solutions stated that for most of 2022, government spending remained limited due to the lack of a budget, noting that, however, the approval of the budget for the fiscal year 2022/2023 and the possible postponement of the budget for the fiscal year 2023/2024 will allow the government to use high oil revenues to support the economy.
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