Saudi Arabia now offers the most encouraging picture among the regional economies in the area of bank credit. Overall lending levels have been edging up fairly steadily led, above all, by lending to the private sector. Banks appear to have large dealt with the challenges of provisions and non-performing loans and general confidence levels are improving because of a clear acceleration in economic activity. Overall bank credit during the June-August period averaged SR882.8 billion, up 8 percent on the corresponding period a year earlier. Private sector lending rose by 8.7 percent YoY to an average of SR794.6 billion during the quarter. By contrast, lending to the public sector contracted by 8.7 percent to SR28.2 billion, the NCB report said.
Bank credit in the UAE has remained subdued, partly because of a stricter regulatory environment, even as the general economic backdrop has improved significantly. The continued weakness of the housing markets, caused by a steady influx of new supply is another factor, although mortgage lending has resumed. Total bank lending in 2Q11 averaged AED980.6 billion, up 1.7 percent. Lending to the private sector actually contracted by 0.1 percent to a quarterly average of AED718.1 billion. Lending to the public sector advanced by 15.2 percent to AED187.6 billion.
In spite of a significant oil windfall, economic activity in Kuwait has continued to be depressed political delays in government-supported investment. The Kuwaiti government had hoped that private investors would cover half the cost of its $111 billion medium-term investment plan. In practice, progress has proven frustratingly slow. Total bank credit in Q3, 2011 averaged KWD27.2 billion, which was only 1.1 percent ahead of the corresponding period a year earlier. Private sector credit rose by an annual 1.2 percent to KWD25.2 billion whereas lending to the public sector advanced by only 0.6 percent to KWD1.9 billion.
Qatar Central Bank seems to have largely met its objective of stimulating private sector credit which is once again advancing at a double-digit annual pace. However, month to month variations, both in private and public sector credit have been significant. Overall bank lending in the June-August period averaged QAR326.1 billion, an annual increase of 15.8 percent, still by far the fastest in the region.
Lending to the private sector rose by an annual 17.2 percent to average QAR213.8 billion. Loans to the public sector grew by a slightly slower 13.2 percent to reach QAR112.3 billion.
Bank lending in Oman, having recently been largely driven by credit to the public sector has now largely matched the rebalancing observed in Qatar. Recent months have seen small declines in credit to the public sector while private sector credit has continued to expand at a robust pace. Overall bank credit averaged OMR11.4 billion in the June-August period, up by a robust 12.9 percent - the second fastest pace in the region after Qatar. Credit to the private sector rose by 9 percent to OMR10.1 billion. By contrast, the growth of lending to public enterprises was still in annual terms an impressive 61.2 percent, to a total of OMR1.3 billion.
Bank credit in Bahrain has been hit by the period of political instability in the spring as well as the subsequent broader economic slowdown, not least significant overcapacity concerns in the real estate space. Overall bank credit in the May-July period averaged BHD5.7 billion, a mere 0.3 percent increase. New lending was nonetheless driven by loans to the private sector which advanced by 3.2 percent to BHD5.5 billion. Lending to the government fell by an annualized 4.3 percent and stood at an average of BHD0.2 billion, the NCB report said.
