Dubai: Banks in the country will have to increase provisions for bad debts this year despite the improvement in the UAE's economic growth rate, UAE Central bank governor Sultan Bin Nasser Al Suwaidi said yesterday.
"Provisions go up and down depending on the situation of the crisis — and we're still in a crisis like all the rest of the countries," he said at the inauguration of the new headquarters of Sharjah Islamic Bank. "Although [the crisis] has come down significantly, it still requires more provisions."
The International Monetary Fund (IMF) predicted earlier that the UAE's real gross domestic product (GDP) would contract by 0.2 per cent in 2009 due to a decline in crude oil production in line with cuts agreed by the Organisation of Petroleum Exporting Countries (Opec).
Forecast
Al Suwaidi said 2010 would see some economic growth but it would not be significant. Meanwhile, following 2009's deflation, the Central Bank governor said, "Inflation will be very low for even more than one year [an extended period]."
In its January forecast, the Economist Intelligence Unit (EIU) has said the UAE would see growth of 3.4 per cent in 2010.
It cited the gradual increase in crude oil output, the coming on stream of several large projects along with increased construction activity in Abu Dhabi, as the main drivers of economic growth in the country.
The governor said that 2009 would be the last year of the crisis, although some after-effects will remain.
"We are still in a crisis, though it's less intense now," he said.
He also said the UAE has no plans to join the Gulf Monetary Union and that the dirham will remain pegged to the US dollar. "We are pegged to the dollar, so we will be pegged to the interest rates too," he added.
The UAE withdrew from talks on the union after Saudi Arabia's capital Riyadh was chosen as the location of the regional central bank.
New headquarters
His Highness Dr Shaikh Sultan Bin Mohammad Al Qasimi, Supreme Council Member and Ruler of Sharjah, officially opened the new Dh300 million headquarters of Sharjah Islamic Bank (SIB) yesterday. He praised the development of Islamic banking and the vital role played by the bank in increasing economic growth to new levels.
The opening of the new headquarters forms part of SIB's expansion strategy, which aims to meet the requirements of a growing market and further improve its retail and corporate banking services.
The modernidation process in the bank will also include the introduction of a host of Islamic banking services.
