Consumer debt in Gulf Arab countries will rise to about 60 % of private consumption next year as banks ride a wave of growth in the region's credit card market, a UK-based research house said on Monday.Credit cards were the fastest growing component of outstanding consumer debt last year in Kuwait, Qatar, Saudi Arabia, the United Arab Emirates and Oman, the five Gulf Arab oil exporters studied by the Lafferty Group.Total credit card dues in the five countries grew to $5.25 billion at end-2006, up 43 % from a year earlier, Lafferty said in a statement. Around $2 billion of that was borrowed in the UAE.
The region accounted for more than two-thirds of the $300 million in pre-tax profit banks in Middle East and North Africa made from credit card operations last year."The region is currently experiencing an explosion in wealth and consumers are increasingly spending this wealth through their credit cards," Lafferty said.The sharp rise in consumer debt has some governments worried, especially in Saudi Arabia, where banks earn on average $95 per year on each card, making it the most profitable credit card market in the Middle East, according to Lafferty.
Personal loans, at $61.64 billion, accounted for the highest proportion of outstanding consumer credit, Lafferty said.Lending curbs, extended by the Saudi central bank to credit cards this year, will cut the total value of the kingdom's credit card bills by 13 % this year, said Alison Smithie, manager of Lafferty's World Cards Intelligence database."Some governments are concerned about the growth in consumer debt but that is somewhat premature as these levels are insignificant by international standards," Smithie told Reuters. Average debt per household rose 15 % to $18,222 in 2006 in the five Gulf countries compared with $97,000 in Britain, she said.All six countries have exchange rates pegged to the dollar, so central banks routinely track U.S. monetary policy, giving them little control over borrowing costs.In 2005 the Saudi Arabian Monetary Agency asked banks to restrict lending to consumers, partly over concerns that Saudis were investing some of the borrowed money in the stock market. The market crashed last year, losing half of its value between February and May.
Credit cards were not covered by restrictions until this year, Smithie said. Lafferty still expects the total number of credit cards in Gulf countries to rise 43 % in two years from the 3.76 million at the end of 2006.That would help drive up total consumer debt as a proportion of private consumption to 60 % by 2008 from 53 at the end of last year, Lafferty said. Source
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