Is There a Silver Lining to Sluggish Credit Growth in the Gulf Countries?


By Masood Ahmed

(Version in عربي )

Bank credit has been very slow to pickup in the six nations of the Gulf Cooperation Council (GCC). How big a problem is this for their economic recovery?

Sluggish credit growth in the post-crisis period was hardly a unique development, as indicated in our latest Regional Economic Outlook. More than a dozen countries in the Middle East and Central Asia region, and countless more outside the region, shared this experience. But while there are clearer signs of recovery in some countries, credit to the private sector is still barely growing in the GCC, notwithstanding policy efforts to revive it.

It might seem easy to ring the alarm bells. After all, won’t the prospect of weak credit growth restrain economic activity in the short-term? Perhaps. But we believe the negative impact of credit growth may not be quite so severe.

Why not? In part, that answer lies in how we arrived at the current situation. Continue reading

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