Qatar’s central bank cut interest rates for the first time in eight months after a slowdown in credit growth.
The bank lowered the benchmark overnight lending rate by 50 basis points to 5 percent and the deposit rate by the same amount to 1 percent, Governor Abdullah Al Thani said today in a telephone interview. He didn’t give a reason for the moves. The last reduction in August aimed to counter deflation and low borrowing costs worldwide, the central bank said at the time.
Growth in Qatari bank credit dropped to 10 percent in February, the slowest pace since 2009, according to central bank data. The decline came amid political turmoil in the Middle East, with unrest in Tunisia and Egypt spreading into some of Qatar’s Persian Gulf neighbors such as Bahrain.
“We see the cut in lending and deposit rates as a move to support private-sector credit growth,” said Monica Malik, an economist at Cairo-based investment bank EFG-Hermes Holding SAE. “There is substantial room to reduce the lending rate.”
Qatar, the world’s fastest-growing economy, held interest rates at levels higher than in other Gulf nations as the global financial crisis crimped borrowing in the region. Its inflation rate rose to 1.8 percent in February, after the country experienced deflation for most of 2010.
Qatar forecasts economic growth of 15.7 percent this year, slowing to 7.1 percent in 2012. The largest exporter of liquefied natural gas, it has a population of about 850,000 and the world’s highest per-capita gross domestic product, according to the CIA World Factbook. The yield on Qatar’s 4 percent dollar bond maturing January 2015 dropped 4 basis points to 2.98 percent today, according to Bloomberg prices.
Qatar’s benchmark stock index has declined about 2 percent this year after climbing almost 25 percent in 2010.