Kuwait – Despite the drop in interest, the savings of the...

• “Corona and the economic closure supported the growth of private sector deposits … despite the record low interest rate of 1.7%
• A sharp drop in consumer spending and a ban on travel and tourism … increased the savings of citizens and residents of banks

Financial analyst
From the beginning of 2020 until the end of last August, private sector deposits witnessed a good growth rate of 4.8% to record 38 billion dinars, and this is the highest historical level ever reached, as a result of the economic closure and the disruption of air and land transport, as consumer spending and spending on Tourism and travel sharply increased, and the savings of citizens and residents increased. This was not affected by the record decline in the general rate of interest rates since the beginning of the current year to about 1.7%.
Returning to the historical track of private sector deposits in Kuwaiti banks during the past 3 years, it becomes clear that in conjunction with the increase in the annual interest rate on private sector deposits with Kuwaiti banks for all maturity periods during 2017 and 2018, to record 1.67% in 2018, compared to 1.62% for the year 2017, 2018 and 2017 witnessed an acceleration in the growth of private sector deposits, which rose by 3.8% during 2017 and then to 4.1% during 2018, to record the end of the year about 36.87 billion dinars.
This acceleration in the growth of private sector savings and deposits came as a result of higher interest rates on deposits than those recorded after 2008, despite the fact that the general average annual interest rate on deposits has been below the 2% level since 2010, which encourages depositors to increase their savings in light of High financial and investment risks, especially in the external financial and real estate markets, and meager investment opportunities in the local market. But during the year 2019, despite the increase in the average annual interest rates on deposits for all maturity periods to a rate of 2% and exceeding the 3% barrier for a 12-month maturity, deposits decreased. The private sector increased by 1.7% during the year to record 36.24 billion dinars.
Distribution of private sector deposits
When analyzing the structure of private sector deposits and their distribution according to currency type, we note that the vast majority of private sector deposits are in Kuwaiti dinars, as deposits in dinars at the end of August 2020 accounted for 94.3% of total private sector deposits, equivalent to 35.84 billion dinars compared to 93% at the end 2019 year.
While the remaining percentage of deposits of 2.15 billion dinars is in foreign currencies, and this is evidence of the encouragement of the national currency and its strength against foreign currencies and the financial policy that is based on keeping the interest rate margin in favor of deposits in dinars and with the support of the official reserve assets of the Central Bank of Kuwait, which reached the end of last August about 14.37 One billion dinars.
For example, the annual interest rate on dinar deposits with a 12-month maturity period during 2019 was about 3.1%, compared to an annual interest rate on dollar deposits for the same period equal to 2.27%, and an interest margin in favor of dinar deposits amounted to 0.83%.
As for private sector deposits in foreign currencies, they decreased in the first 8 months of 2020 by 15% to record 2.15 billion dinars compared to 2.53 billion dinars at the end of 2019, as a result of fluctuations in foreign exchange rates, exchange markets and confidence in the national currency, while private sector deposits increased. In dinars, by 6.3% during the same period.

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