Kuwait's industrial sector has seen a drastic decline in financing, with local banks reporting a decrease of KD 40.7 million, or 53.5%, in June 2024. This decline has brought the total financing for the sector down to KD 35.3 million, a sharp drop from KD 76 million in May.
Monthly and Annual Financing Trends
On an annual basis, industrial financing has also decreased by KD 8.8 million, or 19.9%, from KD 44.1 million in June 2023. Despite these significant declines, the total financing for the industrial sector during the first half of 2024 reached KD 333 million. However, the accumulated balance of industrial financing from local banks fell by 0.9%, or KD 26 million, bringing the total down to KD 2.657 billion compared to KD 2.683 billion in May.
Overall Decline in Industrial Financing
In comparison to last year, the sector has faced a 5.1% annual decrease, equivalent to KD 143 million, dropping from KD 2.8 billion in June 2023. Data from the Central Bank of Kuwait highlights that overall monthly financing for the industrial sector in 2023 decreased by 31%, or KD 466 million, from KD 1.499 billion at the end of 2022 to KD 1.033 billion.
Challenges Facing the Industrial Sector
The industrial sector has been grappling with numerous challenges, particularly over the past three years. These challenges, exacerbated by the COVID-19 pandemic, have included disruptions in supply chains, production halts, and reduced demand. The sector also continues to face issues such as:
Lack of Developed Industrial Plots: Insufficient infrastructure hampers growth and expansion opportunities.
Bureaucratic Hurdles: Complicated regulations slow down project approvals and financing.
Limited Reliance on National Products: This reduces competitiveness and increases dependency on imports.
Absence of Export Facilities: Without adequate facilities, exporting Kuwaiti goods becomes challenging.
These factors contribute to increased factory rents and a reduction in financing available for industrial projects.
Credit Facilities Overview
Despite the decline in industrial financing, monthly credit facilities across all sectors increased by 3%, or KD 359.5 million, in the first half of 2024, rising from KD 11.708 billion in 2023 to KD 12.067 billion. However, credit facilities dropped annually by 11%, equivalent to KD 239.4 million, from KD 2.171 billion in June 2023 to KD 2.099 billion in June 2024.
Credit Facility Balances and Deposits
Cash credit facilities with banks increased by 4.2%, from KD 53.557 billion at the end of December 2023 to KD 55.8 billion in June 2024. Monthly balances rose by 0.9%, or KD 510.7 million, from KD 55.297 billion in May, and grew by 5.3% annually, compared to KD 52.983 billion in June 2023.
Central Bank data also revealed a 1.16% increase in deposits at local banks, rising by KD 569.2 million, from KD 48.727 billion in December 2023 to KD 49.29 billion in June 2024. Annual deposits increased by 3%, or KD 1.457 billion, from KD 47.839 billion in June 2023. Private sector deposits grew by 3.1%, or KD 1.15 billion, while public institution deposits fell by 13.4%, or KD 909.9 million.
As Kuwait's industrial sector navigates these challenging waters, understanding the factors contributing to the decline in financing is crucial for stakeholders. A focus on overcoming bureaucratic hurdles, enhancing infrastructure, and fostering a more competitive environment may pave the way for future growth.