International Monetary Fund (IMF) chief Christine Lagarde in Doha on November 8 said that overall growth in the GCC (Gulf Cooperation Council) is expected to slow down to 3.2 per cent and 2.7 per cent in 2015 and 2016 respectively. The persistency in low oil prices has impacted GCC economic growth as reflected in the IMF forecasts. The banking sector will face challenging times ahead both in deposit mobilisation and in lending. The liquidity conditions which remained difficult on account of low oil prices may further get impacted if GCC policies follow monetary tightening in response to the upcoming US Fed rate hike.

Saudi Arabia's banking sector lending growth up 6.5 per cent YTD till August 2015. The lending for private sector grew 6.4 per cent. There was drop in time and savings deposits by close to five per cent. However demand deposits surged by more than seven per cent. Demand deposits is mostly sourced from businesses and individuals while time and savings deposits is mostly sourced from government entities. Weakening economic growth and strain on funding sources are expected to slow down loan growth in Saudi Arabia. Saudi Arabia's construction sector is hit by spending slowdown and payment issues. One of the contracting companies in Saudi reported a loss in the third quarter of 2015 on account of its 95 per cent revenues from government related projects. The fall in oil prices continues to impacted time and savings deposit procurement.

In the UAE banking sector the lending growth was more than 5.6 per cent in first eight months of 2015. Deposit growth was more than four per cent in first eight months of 2015. Declining oil revenue slowed bank deposit growth and impacted credit growth in 2015. The credit conditions in the UAE have softened in 2015 with moderating demand growth for credit and a tightening of credit standards for corporates.

In Oman banking sector lending growth was close to six per cent in the first seven months of 2015 and deposit growth was above six per cent. Lending growth was sustained in 2015 by higher spending on infrastructure projects the government's proposal to boost funding for development and an increasingly vibrant consumer credit market.

In Kuwait banking sector lending came in at 5.2 per cent year-on-year in June 2015. Lending for security purchases and household borrowing were the major contributors. Loan growth was not picked up on account of slowdown in economy.

Qatari banking sector's credit facilities grew by 9.1 per cent till September 2015. The balance sheet growth was at 6.3 per cent and customer deposits grew by 5.9 per cent till September 2015. The government lending contracted by 4.3 per cent the contraction in government lending is an indication of slowdown and pressure on government finances on account of lower oil prices. Qatari banks have been pro-active in responding to the changing market dynamics. Qatar National Bank's expansion in Egypt its banking acquisition in Turkey and Doha Bank's branch in India highlights that the banks have taken right steps to tap the long-term growth potential in these under banked and oil importing nations these nations will benefit from lower oil prices. Qatar the UAE and Omani banks have taken the lead to expand their presence in these nations.

Economic and social development strategies in the GCC aim to promote sustainable development reduce dependence on oil revenues and increase private sector job creation for nationals (for example Saudi Arabia's long-term strategy 2025 Vision 2020 in Oman Vision 2021 in the UAE Vision 2030 in Bahrain and Qatar National Vision 2030). The GCC banks have to adapt to the changing dynamics in this challenging times to flourish and sustain long-term growth.

The writer is the group CEO of Doha Bank. Views expressed by him are his own and do not reflect the newspaper's policy.