Economic Insights

Domestic credit growth remained robust in Q3 (+1.3%), driving up the YTD increase to 6%. Growth in Q3 was driven by an ongoing resilient business credit expansion and accelerating household credit demand. Business credit should continue to benefit from the improving trend in project awards, and especially in the context of the government’s ongoing debt issuances, which should enable higher spending on projects. Household credit growth is expected to continue its gradual recovery, supported also by incrementally lower interest rates. Therefore, for overall credit growth in 2026, we expect a continuation of the current strong momentum. The housing finance law, which is expected to be approved in the coming months, will be a game changer in the long term, but its impact in the short term will likely be gradual.

Within business lending (+1.4% q/q, +5.5% YTD), growth so far this year has been broad-based with ‘other services’ (+8.3% YTD), ‘real estate’ (+6.2%), and ‘industry’ (+5.5%) in the lead. On the other hand, ‘construction’, after surging by a CAGR of 16% over 2022-2024, has taken a breather in the last few quarters, with y/y growth turning negative while the oil/gas sector continues to disappoint, inching up just 0.6% YTD after falling for three straight years. The positive momentum in terms of project awards continued with the total reaching KD 2.1 billion in 9M2025, sharply higher y/y, and set to potentially exceed last year’s figure (KD 2.6 billion) by year-end. Meanwhile, household credit continued its gradual recovery with growth accelerating to 1.6% q/q, the highest quarterly growth in three years. This lifted the y/y increase to 4%, compared with a trough of 1.5% recorded in 2023. In both 2023 and 2024, household credit was much stronger in the second half of the year than in the first half, and this is turning out to be the case this year as well. If Q3 household credit growth is sustained through Q4, the overall increase in 2025 will hit a decent 4.5%. We note that non-resident credit growth in Q3 was a very strong 21% q/q, pushing up total credit growth (domestic and non-resident) to 8.7% YTD. The 26% YTD increase in non-resident credit was very much concentrated in two categories, ‘banks & financial institutions” and ‘other services’, accounting for 69% and 24%, respectively, of that increase.

Resident deposit growth broadly muted; expectations of US rate cuts come with a high degree of uncertainty

Resident deposit growth continued to be broadly muted with YTD growth at a limited 2.8%. Growth in private-sector deposits (78% of total deposits) is marginally higher at 3.9% YTD with government deposits falling for the fourth straight quarter, down 16% y/y. This lackluster growth in terms of resident deposits was compensated for by non-resident deposits (9% of total deposits), which soared by 60% YTD (KD 2 billion). Meanwhile, after tracking the Fed in its 25 bps interest rate cut in September, the Central Bank of Kuwait left rates steady last week when the Fed cut by 25 bps, further narrowing the gap between the Fed funds rate (4% upper bound) and the discount rate (3.75%). While the futures market currently expects three Fed rate cuts by end-2026, this carries a high degree of uncertainty given ongoing solid US economic growth and still upward pressure on the stubbornly-above-target inflation.

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