Lending conditions in the Mena region remained tightened in the fourth quarter of 2016 (Q4, 16), but at a slower rate compared to the previous quarter.
The credit standards in the region rose to 44.2 points in the Q4, from 39.5 points in Q3, 16, Institution of International Finance’s (IIF) Emerging Market (EM) Bank Lending Survey has revealed.
Throughout the last seven quarters of IFF’s lending survey, the Middle East and North Africa region index has consistently stayed below the 50 points threshold, thus indicating a general tightening of its lending conditions. When compared to 2016 Q3 the headline index for Mena increased by 3.9 points to 44 points, but stayed below the neutral level, according to the survey.
Credit standards in the region tightened at a slower rate in the fourth quarter than the previous quarter. Similarly, the demand for loans decreased at a slower pace than previous quarter, an index of 44.2 points in Q4, up 1.9 points from Q3.
The index for trade finance describes a similar rate of deterioration compared to last quarter, with a reading of 47.8 points for both 2016Q3 and 2016Q4. While the funding conditions index greatly improved to 47.8 points, up 11 points from its previous reading, it still below the 50 pt neutral value, indicating tightening in funding conditions.
Mena respondents to IFF survey saw NPLs rise at a reduced pace than 2016Q3, with this index going from 38 points in Q3 to 40.9 points in Q4.
The composite index for the 2016Q4 EM bank lending conditions survey showed once again an overall deterioration in lending conditions in the EMs, with a reading of 48.0 points , 2 points below the neutral band. Compared to Q3, all components of the index—except the sub- index for Funding Conditions—improved modestly, meaning a slower rate of deterioration.
In 2016Q4, the demand for loans in EMs is at 49.5 points after reaching a 2-year low of 46.2 in Q3. This sub-index is still in tightening territory, consistent with an uncertain environment for EMs.
A common theme in the survey—the deleveraging in EMs—appears to be continuing with more rapid tightening- 46.2 points in Q3 compared to 45.8 points in Q4.
