Kuwait Central Bank (CBK) Governor Dr. Mohammad Al-Hashel
CBK chief expects "positive growth" in Kuwait economy this year
KUWAIT- Kuwait Central Bank (CBK) 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," Al-Hashel added.
On the domestic scale, 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.
In regards to monetary policy measures taken to face the crisis, CBK carried out a "range of support measures," namely slashing its policy rate by a cumulative 1.25 percent during 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," he said.
CBK 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 "healthy" 3.5 percent growth in 2019, with sectors like consumer loans, public services and agriculture and fishing posting double digits, while others, such as crude oil and gas, instalment loans and real estate loans, showed "noticeable growth." "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 currently prevailing record low interest rates," said Al-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 closing 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," he added.