The banking sector of Qatar will be less impacted by the adverse effects of COVID-19 outbreak, compared to banking sector in other neighbouring economies. The lending growth in Qatar, along with Saudi Arabia, will be more than other GCC countries, said S&P Global Ratings in a report. Government projects will boost Qatar’s banks lending growth, added the report.
It expects GDP growth in the GCC countries to slowly recover from last year’s recession triggered by the COVID-19 pandemic and low oil prices.
“We see long-lasting adverse effects from the 2020 shock on GCC economies and banking sectors. Saudi and Qatar’s banking sectors will be less impacted than those in the United Arab Emirates (UAE), Oman, and Bahrain, while in Kuwait the story will depend on the evolution of the fiscal impasse,” said the report which was released yesterday.
The banking sector of Qatar has performed well despite the challenges created by the outbreak of COVID-19 pandemic. According to the data of the Qatar Central Bank (QCB), the total domestic credit by commercial banks in the country grew by around 9 percent in December 2020. The total domestic credit grew to QR1.05 trillion at the end of December 31, 2020, as per the QCB figures. As per the report except for Qatar and Saudi Arabia, lending growth in other GCC countries is expected to be muted.
“We expect muted lending growth in all GCC countries except Qatar and Saudi Arabia,” said the report. “In Saudi, mortgage lending continues to expand due to the authorities’ objective of increasing home ownership, while in Qatar government projects are boosting growth,” it added.
Strong and stable capital buffers, good funding profiles, and expected government support should continue to support banks’ credit worthiness in 2021.
Regarding Mergers and Acquisitions, the report noted that a second wave of mergers and acquisitions could begin when the full impact of the weaker operating environment on banks becomes visible.
