GCC bank lending poised for sharp slowdown in 2009

A sharp slowdown in the economies of Gulf oil producers will ally with lower asset prices to stifle lending activity by their banks in 2009 and this will adversely affect their performance, according to a key Kuwaiti financial centre.

Markaz said an overheating in the economies of the six-nation Gulf Co-operation Council (GCC) in 2007-'08 because of the surge in crude prices sharply pushed up credits by regional banks and the UAE emerged on top of the list.

The UAE and Qatar could be the only GCC countries to record negative growth in credit activity this year on the grounds they suffered more from a real estate downturn than other GCC nations, Markaz said in 35-page a study. It said the 2004-2006 period witnessed what it called a reasonable level of asset intermediation, which is the ratio between banks' claims on the private sector to the gross domestic product. It noted the proportion between such claims and the GDP indicates the extent of heating in the local economy.