Posted on April 21, 2018

Qatari banks expect private sector credit growth in the country to pick up speed in 2018 as companies borrow and invest to expand their business, taking advantage of opportunities created by a regional political impasse. The government and state-linked companies have long been the mainstay of credit growth and will continue to be, especially as Qatar prepares to host the 2022 FIFA World Cup.

But a political rift that erupted between Qatar and Saudi Arabia, the United Arab Emirates, Bahrain and Egypt in June and the subsequent scaling back of some companies and investments from those countries is creating a vacuum gradually being filled, in part, by Qatar's private sector. QNB is targeting the private sector to contribute around 50% of lending growth in 2018, up from 22.5% in 2017, said a spokesman for QNB, the largest bank in the Middle East and Africa by assets and the lender that has benefited most from huge government spending in recent years. "Looking ahead to 2018 and beyond, the projected growth of the private sector will present several opportunities for the bank to finance the expansion of business," said Commercial Bank of Qatar.

Bankers say opportunities are being created in the consumer goods sector as the market share shrinks of suppliers like Saudi Arabia's Almarai, the Middle East's biggest dairy company, because of the embargo. One company filling the vacuum is Baladna, which is creating a dairy industry in the country and is planning an initial public offering in the first half of 2018. Other sectors where higher demand is anticipated include manufacturing and hospitality, while investment is expected in the LNG sector due to a sharper rebound in hydrocarbon output. The government has embarked on a strategy of making the economy self-sufficient to help weather the effects of the boycott. 

This year's budget includes awarding QR29bn of contracts to support growth in the private sector next year, part of a drive to diversify and strengthen the economy. So far, the pick-up in private sector growth is far less steep than the period up to mid-2015 when it reached highs of around 27%. It since slowed but has shown signs of recovery in recent months, despite the impact of the boycott. "The previous tightening of financial conditions between mid-2014 to mid-2016, when hydrocarbon prices precipitously declined, does not seem to have harmed private sector lending post-impasse from June 2017 onwards," said Ehsan Khoman, Mena head of research and strategist at Mitsubishi UFJ Financial Group.

source: Reuters