Rate cut to support credit growth across GCC | Lower interest rates and softer dollar to attract fund flows into the region

Dubai: The recent interest rate cut by the Federal Reserve is expected to boost private sector credit growth and credit demand in key GCC economies, according to economists.

GCC central banks, with the exception Kuwait, announced interest rate cuts following the 25 basis points interest rate cut by the Federal Reserve last week. With the GCC currencies pegged to the dollar, most central banks in the region instantly followed the Fed and cut their key policy rates. Kuwait — the only GCC country with a basket-pegged currency — kept its policy rate on hold.

Monetary easing is expected to make borrowing cheaper for investors across key GCC economies. Private sector credit growth in Saudi Arabia is accelerating, reaching 2.7 per cent year on year in June 2019, after dropping to negative territory in 2017 and early 2018.

Gross credit growth in the UAE accelerated 0.7 per cent month on month and 4.3 per cent year on year in June according to the latest central bank data. The strongest monthly growth in credit was from the government related entities and private businesses. Year to date (YTD) data in the UAE showed private businesses’ credit growth has moderated from end-2018, while retail has contracted by 1.5 per cent YTD.

Babu Das Augustine, Banking Editor

Source : Gulf News

Leave a Reply

Your email address will not be published. Required fields are marked *