(MENAFN- Gulf Times) An expected higher credit demand from both public and private sectors this year is slated to keep busy Qatar's banking industry, which has weathered the sudden and unjust economic blockade remarkably well, according to the country's banking regulator.
'Going forward, demand from both public and private sector is expected to increase due to policies targeted to strengthen small and medium enterprises (SME) sector and the infrastructure projects, the Qatar Central Bank (QCB) said in its Financial Stability Report 2017.
Highlighting that the government is focusing on completing major projects in key sectors and projects related to 2022 World Cup; the QCB said this is expected to provide required momentum for credit demand from both private and public sector in 2018.
The budget allocation of financial resources for the development of housing plots and support of projects related to food security, SME sector, tourism sector and infrastructure developments in free zones would rejuvenate the private sector demand for credit, according to the report.
'Thus, the financial sector, in particular, the banking sector, has a greater role to play, in consistence with the developmental activities and the corresponding demand, the report said.
Stressing that the probability of crystallisation of downside risks seem to be small at this juncture; the QCB said, excess capital buffers and high asset quality of banks strengthen the ability of banks to withstand much higher levels of stress.
The country's banking sector remained 'sound, liquid and profitable with capital adequacy ratio remaining well above the minimum requirement prescribed by the QCB while the non-performing loan ratio remained low at 1.6%, the lowest among its the Gulf Co-operation Council peers.
'The profitability remained intact at around the same level as the previous year. Liquidity and funding structure of the sector, which was strained at the beginning of the embargo, improved subsequently and attained normalcy, it said, adding the banking sector has regained global investors' confidence, as evident from the growth in funds from international financial institutions and investors from Asia and Europe.
'On balance, the banking sector has weathered the sudden and unjust economic blockade remarkably well, which is a testimony to the resilience of the system and its strong fundamentals. Nevertheless, challenges to the banking sector cannot be ruled out completely and has to be monitored with utmost care, it said.
Although the downside risks include prolonged low energy prices and associated liquidity tightening, the recent oil price trends upticks provide positive signals to the sector. Further, the trends in US interest rates may also pose some vulnerability that may impact bank's profitability through higher funding cost.
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