Dubai: Liquidity remains a major constraint to credit growth across the GCC. In the UAE, there is a 4 per cent rise in delay of payments, because of a lack of bank lending and a liquidity crunch.
“Notifications of overdue have increased in key sectors of the country’s economy. Comparing figures of third quarter 2016 from the previous quarter of the same year, the highest increase of overdue notifications in the UAE was registered from the metal traders and building materials or construction sector (+26 per cent), followed by the general trading sector (+22 per cent),” said Massimo Falcioni, CEO of Middle East Countries at Coface.
Based on Coface’s monitoring of 23,000 companies in the UAE and Saudi Arabia, a total of 814 runaway cases of UAE-based businesses was registered from Q3 2015 to Q4 2016 (six quarters), yielding a 200 per cent increase from the previous year. More than half (55 per cent) of these runaway cases were businesses in the general trading sector.
Nevertheless, UAE is still in a stronger position compared to most other nations in the region due to the diversified economy and political/governance stability. In a Coface country risk of business defaulting assessment overview published in January, the UAE was categorised as A4 (acceptable risk). The overall Middle East sector risk assessment is that three-fourths of the region’s sectors are considered “high” or “very high” risk.
