The effect of bank credit on economic growth: An applied study in the GCC countries

All the countries of the world seek to achieve economic growth permanently and continuously. To achieve this, interest in the banking and financial sector is increasing as it is the most important internal source for financing development projects and contributing to economic growth by granting bank credit to the economic sectors. The Gulf economy relies on oil for its revenues by up to 50% of GDP, and as a result of the decline in oil prices, economic growth has suffered a sharp decline since 2014,As a result, the trend to find internal sources of financing was more secure and sustainable represented by the financial and banking sector. Therefore, this study aimed at identifying and measuring the impact of bank credit on economic growth in the GCC countries (Saudi Arabia, UAE, Kuwait, Qatar, Bahrain, and Oman) for the period 2008-2017at the level of the economy as a whole and at the level of the economic sectors. In addition to knowing the role of economic growth and its impact on bank credit, Based on the periodic data of the study variables and for measuring the sample of the study (credit function - production function). Based on the Cobb-Douglas production function, the quantitative standard methods were used in the "Panel Data" method, specifically the "Fixed & Random Modals" method, the " Unit Root Testes" "Panel Co-integration Testes". This study found a significant positive effect of the bank credit on economic growth (non-oil GDP) at the level of the economy as a whole, which accounts for 44% of the change in non-oil GDP. despite the positive impact, it still has not reached the desired level. At the sector level, the impact of bank credit on GDP is evident in the construction and services sectors, while there is no impact on the agricultural and industrial sectors. This study also found a significant positive effect of the gross domestic product (non-oil) on bank credit, which accounts for 34% of the change in bank credit at the level of the economy as a whole. At the sectors level, there is an impact of non-oil GDP on bank credit in the construction sector, while there is no impact on other economic sectors. We also noted that bank credit and GDP have a reciprocal relationship, which effect on each other, although bank credit affects more than GDP. With regard to which sectors contributed more to GDP, we also found that the services and industry sectors are the most important sectors contributing to the Gulf economic growth. From this study we recommended a set of recommendations that could contribute to improving the contribution of the Gulf Banking sector to economic growth.