Private sector borrowing picks up

Posted on : Thu, 08 Dec 2011

The annual growth rate of bank credit to the private sector in Qatar has picked up strongly in 2011. It has climbed steadily from 4.3% in January to reach a peak of 18.8% in August, where it has levelled off. Total bank credit to the private sector reached QR221bn (US$60.7bn) at the end of October 2011, representing 61% of total domestic credit. QNB Capital notes that the growth rate remains broadly in line with the average rate of 15% in 2009-10.

Credit growth provides an indication of activity in the economy. The private sector is regarded as key to meeting the employment targets and economic diversification goals envisaged in Qatar’s National Vision 2030 and the National Development Strategy 2011-16.

recovery in private sector credit has been stronger in Qatar than in all the other GCC countries. For example, in the year to October 2011, private sector credit expanded by 9.8% in Saudi Arabia and by 2.4% in Kuwait. While in the year to September 2011, it grew by 9.2% in Bahrain and by 8.9% in Oman. Credit growth in the UAE was just 1.3% in the year to June 2011.

The real estate is the most important component of credit to the private sector. Its share has risen to 22% of total domestic credit from 14% in October 2010. The next largest sector is consumption, or retail lending, which grew at 12.7% in the year to October 2011, but its share of total credit fell from 19% to 17% over this period. The services and industry sectors have also expanded at rates of 6.2% and 2.8% respectively in the year to October 2011.

The largest component of total domestic credit is the public sector. Annual growth in Qatar’s public sector credit has been strong, averaging 45% in 2006-10 and it was 16% in the first ten months of 2011 compared with the same period of 2010. It has accelerated from a low in the middle of 2011 to reach 33% in the year to October. The public sector now accounts for 39% of total domestic credit compared with 36% in October 2010.

Looking forward, QNB Capital expects credit growth to remain strong in 2012-13 as Qatar’s infrastructure development presses ahead and the non-oil sector expands its activities.