Kuwait banks see 2.2% dip in construction sector financing

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KUWAIT CITY, Jan 18: During the first 11 months of 2023, local banks experienced a decline of 2.2 percent in consolidated financing provided to the construction sector, worth 36.5 million dinars. This decrease brought the total from 1.628 billion dinars in the corresponding period of 2022 to 1.591 billion dinars in 2023. The monthly statistics from the Central Bank of Kuwait for November reveal a 29.6 percent month-on-month decrease in construction financing, totaling 53.3 million dinars.

This decline was notable compared to the 179.9 million dinars recorded in October. On an annual basis, construction financing dropped by 29.7 percent, equivalent to 53.5 million dinars, compared to 180.1 million dinars in November 2022. This reduction in construction financing coincided with an overall decrease of approximately 552.3 million dinars (2.6 percent) in new credit facilities across all sectors during the first 11 months of 2023.

The facilities also witnessed a monthly decline of 3.8 percent, falling from 1.875 billion dinars in October to 1.803 billion dinars in November. Contrasting the situation, construction financing experienced a surge of 57.4 percent in total financing provided during 2022, reaching 635.2 million dinars, up from 1.105 billion dinars in 2021 to 1.741 billion dinars in 2022. Throughout 2023, construction financing exhibited fluctuations, starting at 112.8 million dinars in December and increasing to 118.2 million dinars in January, 147.1 million dinars in February, and 217.9 million dinars in March. However, it decreased to 92.1 million dinars in April, rose again to 110.1 million dinars in May, and further to 123.9 million dinars in June. July saw an increase to 158.3 million dinars, followed by 162.5 million dinars in August, a dip to 155.1 million dinars in September, and a rise in October to 179.9 million dinars.

The accumulated balance of construction financing provided by local banks witnessed an annual increase of 15.7 percent, totaling 355.9 million dinars. This brought the balance from 2.269 billion dinars in November 2022 to 2.624 billion dinars in the same month of the following year. However, this balance experienced a monthly decline of 0.3 percent, totaling 8.5 million dinars, after reaching its highest level in two years at 2.633 billion dinars in October.

Simultaneously, the balance of total cash credit facilities provided by banks across all sectors increased by 1.9 percent during the first 11 months of 2023, amounting to 1.015 billion dinars. This growth took the balance from 52.447 billion dinars in December to 53.463 billion dinars by the end of November. The construction sector in Kuwait confronts several challenges, including a decline in project offerings and awards, contract signings, and delayed government payments to contractors over the last five years.

Additionally, the sector grapples with the worsening issue of rising construction costs due to a shortage of labor, resulting in unprecedented wage increases. Real estate experts point out that the problem extends beyond quantity to the quality of labor, with many experienced workers leaving the market in the past two years. The daily wage of a construction worker has increased significantly, rising from 10 dinars before the “Corona” pandemic to 30 dinars currently, reflecting the demand-supply dynamics in the labor market.
By Ahmad Fathi
Al-Seyassah/Arab Times Staff

This news has been read 758 times!