Kuwait Times, Tuesday, Apr 6, 2021 | Shaaban 23, 1442
Central Bank sees positive growth in 2021
Central Bank of Kuwait Governor Dr Mohammad Al-Hashel expects the country
to witness “positive growth” during 2021, but conceded it will “take time” to
return to pre-pandemic levels. “Encouragingly, early monetary, prudential and
fiscal policy interventions since the outbreak of the pandemic have ensured that
the country’s productive capacity remains broadly unscathed, offering hopes of a
swift recovery once the pandemic is brought under control,” he told The Banker
in an interview.
In spite of the economy being hampered due to lockdowns and the recent drop in
oil prices, particularly in the first half of 2020, the government-led
inoculation campaign, currently underway, has “improved public sentiment and
brightened economic prospects”, Hashel added. On the domestic front,
contact-intensive businesses have been “adapting”, he said. This is demonstrated
in the rise of online sales, restaurants being an example. The recovery in oil
prices, reaching their highest levels in more than a year, also bodes well for
Kuwait’s oil and non-oil gross domestic product growth, he mentioned.
With regards to monetary policy measures taken to face the crisis, the Central
Bank carried out a “range of support measures”, namely slashing its policy rate
by a cumulative 1.25 percent in March 2020, from 2.75 percent to 1.5 percent.
“That move alone saw our interest rates falling to record lows, which
significantly eased funding conditions and the debt servicing burden for
borrowers of all types,” Hashel said.
The bank also “partially relaxed a range of prudential regulations to ease any
potential liquidity constraints and to enable banks to continue playing their
role as financial intermediaries”. Domestic credit posted a “healthy” 3.5
percent growth in 2019, with sectors like consumer loans, public services and
agriculture and fishing posting double-digit growth, while others, such as crude
oil and gas, instalment loans and real estate loans, showing “noticeable
“We expect credit growth to remain healthy in 2021, as the impending rebound in
business activity and potentially higher capital spending will boost demand for
business credit. Household credit, with lending to citizens in particular, is
also expected to stay upbeat, supported by job security and the currently
prevailing record low interest rates,” said Hashel.
On banking sector resilience amid the pandemic, banks have maintained “ample
liquidity”, he said, with coverage and net stable funding ratios reaching 184.2
percent and 114.3 percent respectively at the close of 2020, against a 100
percent required benchmark. “Although there is considerable uncertainty around
the outlook, our banking sector remains resilient and well-poised to benefit
from the improved economic opportunities that the recovery would offer,” Hashel