Mubasher: The existing rate environment in the MENA region remains conducive for extending ongoing credit growth recoveries, according to a recent report by EFG Hermes, an EFG Holding Company.
Meanwhile, except for the UAE and Egypt, retail credit in most countries remains largely more tamed. The year 2025 was fairly good for credit growth across the region, with expanding economies, falling interest rates and economic reforms driving a larger appetite for credit demand. The latter remains largely concentrated in the corporate segment, which is benefiting from the government’s strong drive to support growth.
Regional Credit Outlook
The UAE and Kuwait recorded notable credit expansions in 2025, as credit impulse finally started to pick up.
EFG Hermes expects both countries to sustain healthy credit demand in 2026, thanks to a positive economic outlook, as well as the recent policy rate cuts by their respective central banks.
In Kuwait, the economy is enjoying two strong years of project awards, which bode well for credit appetite as they typically filter through with a lag.
In contrast, we project a slowdown in credit growth in Saudi Arabia, in light of the new regulations pushed by the Central Bank SAMA, namely a 100 basis points (bps) rise in countercyclical buffers. By design, the regulation is introduced to slow down credit growth and comes over and above an environment of spending cuts and project recalibration.
As for Egypt, EFG Hermes also projects a continuation of elevated credit growth, as restored macro stabilization makes room for corporates to expand. Macro stability will be complemented with further rate cuts by the Central Bank of Egypt (CBE) as the disinflation trend gains more ground. It noted: “We forecast inflation to end 2026 within the range of 8- 10%, leading us to expect 600-700 bps of rate cuts in the coming 12 months.”
While such rate cuts might look somewhat aggressive in nominal terms – with the CBE having already cut rates by 525 bps as of November – they do remain reasonable, in EFG Hermes’ view.
Such levels would still be at a historic high and would remain relatively competitive; thereby, not risking much outflow from the carry trade, which is important to maintain relative EGP stability.
To conclude, EFG Hermes said: “We project private sector credit growth of c25% in fiscal year (FY) 2025/26 and FY26/27. We believe lower nominal rates will further increase appetite for credit, which is already running at healthy levels – even in real terms – despite nominal rates being still close to their all-time highs.”
The past few years of depressed investment levels, especially for the private sector, hint towards room for pent-up demand, subject to FX availability and macro stability.
Projection for Cuts by Fed
Globally, monetary easing more or less met expectations in 2025, with the US Federal Reserve cutting rates by 75 bps, relative to EFG Hermes’ projection of 100 bps, with all rate cuts concentrated in the second half (H2) of 2025.
As such, EFG Hermes still sees the impact of these later cuts filtering through into the early months of 2026.
Looking into 2026, it does look like there are limited prospects of many more rate cuts in the US. Indeed, the market is currently pricing in only one rate cut towards end of year.
“We project only 50 bps of cuts by the Fed. In all cases, the key message is that investors should not be assured of a major monetary easing next year,” according to EFG Hermes.
Such an outlook of constrained monetary easing is built on the still-sticky inflation in the US, which continues to trend higher than the Fed’s target of 2%.
Moreover, the impact of tariffs is manifested in the still-elevated goods’ inflation, while concerns persist over the impact of migration on the labor force. With such a backdrop, the market is rightly concerned that next year’s fiscal stimulus, “as the Big Beautiful Bill comes into effect,” will constrain the Fed from extending its easing cycle.
EFG Hermes stated: “We anticipate a low probability of rate cuts H1-26, before room for easing sets in during H2 when we project two rate cuts.”
