Doha: Qatar’s credit growth is estimated to accelerate from 2.8 percent y-o-y in 2023 to 4 percent by the end of this year.
According to a report by Fitch Solutions, analysts note that the stronger demand across various markets and slower pace of loan repayment are the primary reasons behind the growth.
However, the loan growth is expected to further surge to 5 percent y-o-y by the end of next year due to the lower cost of borrowing.
On the other hand, robust asset growth, in addition to the expansion in the bond portfolio will drive asset growth higher in 2024 and 2025, says researchers.
Market experts stressed that credit growth is expected to remain significantly below the past decade’s average of 9.7 percent, as demand for credit remains lower than the funding needed for the large-scale projects implemented during the World Cup hosted in Qatar approximately two years ago.
This year, diverse factors have continued to drive lending activity across the country. Industry leaders highlight the higher demand for credit is primarily due to Qatar’s hosting of global events.
This is followed by a resilient demand from the realty market that adhered to the central bank’s introduction of new financial measures to facilitate real estate financing in the past year. Plans to initiate the North Field expansion project that are worth $19.2bn in 2024 will also boost demand in the construction realm.
In the meantime, a recovery for the public sector loan as the debt repayment will ease compared to 2023, carrying less headline credit growth is also remarked for driving the demand in the country.
The report states that credit growth revved from an average of -0.3 percent from January to May 2023 to 1.9 percent, when compared with the same period in 2024. This was mainly due to the ongoing lending activities in the sector, along with robust services and real estate sectors witnessed across the country.
Market analysts accentuate that some of these factors will persist to support the growing demand for credit in the coming year.
“In addition, lower cost of borrowing as we expect that the Central Bank of Qatar will begin to lower the policy rate by 50 basis points (bps) in H2 2024 and 200bps in 2025 will boost demand for credit,” the report said.
This acceleration of asset growth marks a downward revision from 5.1 percent and 6 percent previously due to a stronger-than-expected decline in other assets (22.2 percent of total assets) in the first five months of 2024.
The report further added, “This will be supported by an expansion in bond portfolio (14.3 percent of total assets), as we think that still-elevated global interest rates will continue to encourage investment in foreign currency securities, while lower hydrocarbon revenues in 2025 will increase the government’s borrowing needs.”
On the other hand, in liabilities, the deposits are expected to be boosted by 6 percent y-o-y in H1 2024, following a decline of 1.3 percent witnessed in 2023.
This signals an upward revision from 4 percent, as deposits developed by 4.7 percent within the first half of the year.
Source: Zawya
