Abu Dhabi The UAE’s economic growth this year may better the International Monetary Fund’s (IMF) gross domestic product (GDP) growth estimates of 3.5 per cent for the country, the Central Bank said yesterday in its first-ever Financial Stability Review.
Citing reasons for its optimism, the apex bank said: “Dubai may achieve 4 per cent growth or more as it was stated in the Dubai Economic Outlook for the year 2012; an equally high high growth is expected in the emirate of Abu Dhabi following the recent decisions to create two new industrial clusters and to go on with some landmark projects; increased public spending in the Northern Emirates and expected high oil prices for the whole year.”
“The UAE managed to have a good year in 2011 despite a difficult international environment; it achieved an overall balance of payments surplus and respectable growth while maintaining a low inflation environment,” said the Central Bank Governor Sultan Bin Nasser Al Suwaidi in a statement.
He said thanks to ample capital and satisfactory profitabilty, UAE banks were able to weather the impact of a further increase in non-performing loans and constitute additional provisions.
“Liquidity remained at an acceptable level as demonstrated by banks investing Dh80 billion in the Central Bank’s Certificates of Deposits as at the 31st of December 2011,” said Al Suwaidi.
The central bank said the core capital buffer held by UAE banks, over their regulatory requirement, amounts to around Dh100 billion. “This buffer introduces a significant level of comfort to the UAE-based banks, especially national banks. As issues with major corporate entities are being resolved through either the rescheduling or restructuring of part of their loans, having a sizable capital buffer in place will help reduce the impact of any adverse outcome,’ it added.
With regard to inflation, the central bank said it is unlikely that that CPI (Consumer Price Index) inflation will reach an uncomfortable zone in the UAE as long as housing prices are decreasing or at least stabilizing and the increase in imported prices is limited to international inflation given the Dirham’s fixed peg to the U.S. Dollar.
