According to the IMF report of October 2021, the world economy is expected to grow by 5.9% in 2021 and 4.9% in 2022. The growth of advanced economies is projected at 5.2% in 2021 and 4.5. % in 2022. Growth in emerging and developing markets is projected to be 6.4% in 2021 and 5.1% in 2022. Headline inflation rates have increased rapidly in the United States and some emerging markets and developing economies. development. Trade volumes are expected to increase by nearly 10% in 2021, to moderate to around 7% in 2022. Concerns about the Omicron variant will still prevail in 2022, and many economies in the Globe and GCC will be affected. The Federal Reserve signaled three rate hikes in 2022 to fight inflation. During the Covid-19 shock, the banks benefited from the support of the public authorities, indirect support, through various budgetary and monetary policy measures.
Global bank balance sheets are in good shape with stronger capital, improving profitability and healthy asset quality amid Covid-19. The main risks for the global banking sector in 2022 include the economic recovery from Covid-19, volatile financial markets, debt leverage and difficult banking business models for fintechs. Monetary tightening cycles have started in some economies due to the surge in inflation. Inflation could help NIMs. The economic rebound will support demand for credit, rates are expected to rise slightly as inflationary pressure increases, consolidation will reduce overcapacity and improve efficiency. Technologically, more investment is needed to meet changing customer preferences and increase efficiency. The focus is on working from home, big data and artificial intelligence. The digital ecosystem is expected to continue. The ESG framework in banks would allow integration into business strategy and risk management. It will provide opportunities for growth and act as a catalyst. The rise of cryptocurrencies has shed light on blockchain solutions, discussions on central bank digital currencies are brewing. Technology must be a catalyst and not a medium of exchange. If cryptocurrencies are measured and managed within a framework, then that’s okay. Regulatory technology is emerging to respond to the regulation of financial services. This can make compliance efficient and provide a competitive advantage.
The global banking industry has reacted quickly to the bottlenecks by strengthening its digital products and services. The shift to cashless economies is accelerating greatly with the increase in the use of card and mobile payments. The retail banking and payments segments have been disrupted for years, the merchant and investment banking and asset management segments will increasingly see similar trends in digital offerings in 2022. Digital solutions and market infrastructure will be much more diverse, but personal relationships will continue to play a role.
The outlook for GCC banks over the next 12-18 months is stable, as the region continues to recover from the coronavirus pandemic thanks to rising oil prices. Large infrastructure projects and regulatory measures will also support the credit growth of GCC banks in 2022. The autonomous credit profile of banks remains strong, helped by high capital buffers, strong profitability and improving conditions. economic.
Non-performing loans will increase slightly as the repayment holidays expire, but asset quality will remain generally good. The completion of major infrastructure projects, such as stadiums for the FIFA World Cup in Qatar in 2022 and “gigantic projects” in Saudi Arabia as part of its Vision 2030 program will boost demand for credit in 2022 .
Activities contributing to Expo2020 and the FIFA World Cup Qatar 2022 will also support the economy and banking sector in 2022. Qatar tax policy 2022 focuses on health, education and infrastructure. Qatar’s banking sector had seen loan growth of nearly 8.5% in the first 11 months of 2021. Contracts, services and trade are the main contributors. Deposit growth is also expected to improve next year, as abundant liquidity in the banking system will provide protection against unforeseen shocks. In the first quarter of 2022, banks are expected to remain vigilant over the economic impact of Omicron and other variants of Covid. Banking business models have been impacted by Covid variants since March 2020. They are realigning to meet the challenges posed by Covid variants. Globally, the bank is redefining itself due to the variants of Covid.
* Dr R Seetharaman is the CEO of Doha Bank Group.