Productive sectors helping credit growth In its latest economic brief on monetary developments, National Bank of Kuwait (NBK) reports that the money supply (M2) expanded 2.0% month on month (m/m), up KD 512 million, boosted by a large inflow of outside funds in February. This resulted in a KD 469 million growth in Central Bank of Kuwait’s (CBK) net foreign assets. Much of these funds, subsequently, found their way to local banks, where deposits grew KD 481 million. As a result, banks in Kuwait saw a large boost in liquidity in February, which added to already comfortable levels. Meanwhile, credit growth picked up somewhat this month, helped by strong demand from productive sectors, namely trade, construction, industry, and oil and gas. Credit to residents was up KD 38 million in February, following slow-to-negative growth in previous months. The improvement was partially the result of action taken by the CBK, which reduced interest rates on February 8. The discount rate was cut 50 bps to 2.5%, while the 1-week and 1-month Repo rates were also cut 25 bps to 1.5% and 2.0%, respectively. NBK noted that during February, loans to the productive sectors posted a combined KD 70 million growth. These sectors have witnessed strong 3-month annualized growth over the past months. Apart from interest cuts, demand for credit in these sectors was perhaps enhanced by the financial stability law, which went into effect in April of 2009. In fact, since end August 2009, new loans to the productive sectors have totaled KD 270 million. These loans are 50% guaranteed by the government if they fulfill the criteria of the stability law. On the other side, NBK also noted that personal facilities and loans to real estate fell KD 41 million and KD 52 million in February. These sectors were the growth leaders in 2009.