Economic Insights

Domestic credit ended the year on a strong note, increasing by a solid 1.2% in Q4, driving up 2024 growth to 3.7% following a multi-year low of 1.7% in 2023. Unlike historical trends, business credit growth was robust in Q4 (+0.6% q/q) pushing the full-year increase to 4%, up from just 0.8% in 2023, while the recovery in household credit continued with growth at 3% in 2024. For 2025, we expect business/household credit growth to be similar to 2024. However, if a housing finance law is approved, stronger household credit growth will be unlocked. While the shift higher in the US interest rate outlook versus prior expectations is a damper on growth, the faster roll-out of domestic project awards, as seen in 2023-2024, is a main tailwind.

Within business lending, “construction” remained in the lead, in line with 2022-2023, up 7.9% in 2024 followed by “trade” (+7.3%). In contrast, the oil/gas sector remained the main laggard, falling by a steep 10% in 2024, a third consecutive annual drop. Growth for the heavyweight real estate sector recovered sharply to 6.8% in 2024 from 1.3% in 2023. Project awards continued the solid recovery that started in 2023, rebounding by 44% in 2024 to stand at KD 2.7 billion, the highest level since 2017. This robust pick up in awards, if sustained, is an upside risk to business credit growth. On the other hand, the recovery in household credit continued with growth doubling to 3% in 2024. The bulk of that increase happened in the second half of the year with annualized growth over the past six months reaching 4.2%. Meanwhile, for the fourth year running, credit for securities purchase boosted overall credit growth, standing at nearly 10% in 2024. We note that credit for non-residents expanded by a whopping 32% in 2024, resulting in an overall solid credit (domestic plus non-resident) growth of 6.8%. Lending to banks/financial institutions and “public services” accounted for 38% and 28%, respectively, of the increase in non-resident credit in 2024.  

Solid recovery in private-sector deposits in 2024 while growth in government deposits decelerated sharply

Resident deposits were muted in Q4, resulting in full-year growth of 3.6%, similar to the 3.9% recorded in 2023. However, the growth in private-sector deposits (77% of total deposits) rebounded to 4.5% in 2024 from 1.1% in 2023, likely supported by the elevated interest rate environment and improved non-oil growth performance. In contrast, the increase in government deposits decelerated sharply to 5.7% in 2024, normalizing after surging by a CAGR of 28% in 2022-2023. Within private-sector KD deposits, CASA decreased by a limited 1.1% in 2024 while time deposits increased by 8.5%, an unsurprising narrower differential compared with 2023 (-11% versus +12%).

Rate outlook edged higher vs. prior expectations ushering a weaker-than-hoped boost to 2025 credit growth 

The Central Bank of Kuwait, unsurprisingly, cut rates (25 bps) by less than the Fed (100 bps) since the start of the easing cycle in September. The growth and inflation dynamics in the US, including the potential impact from President Trump’s expected policies, shifted the interest rate outlook higher compared with prior expectations with the current market-implied pricing pointing to only one-to-two US rate cuts in 2025. This, all else equal, will likely result in a softer boost to 2025 credit growth than previously hoped.

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