Gulf surplus set to touch $3tr

Dubai: The Gulf countries' current account surplus is expected to reach $3 trillion this year due to the high crude oil prices, said Ahmad Humaid Al Tayer, Chairman of Emirates Bank Group, yesterday.

Delivering a keynote address at the opening session of the International-Arab Banking Summit 2007 'Euro-Arab Banking Dialogue' in Brussels yesterday, Al Tayer said the revenues of the GCC states have surpassed even those of China's huge foreign reserves, to register a record $1,600 billion in foreign assets.

"Given the huge inflow of cash due to higher crude prices, the current account surplus of the six Gulf countries will soon touch the $3 trillion mark," he said.

The UAE's economic diversification strategy according to Al Tayer is working extremely well for the federation with the non-oil sector gaining support from the strategy.

"The diversification programme, lead by the country's policymakers, is helping the UAE to prepare for eventual oil price moderation and the gradual reduction in domestic hydrocarbon reserves," he said.

The UAE's GDP surged 23 per cent last year to $163 billion. The economy is expected to grow further this year with the GDP exceeding $188 billion.

The UAE's banking sector, he said, gained substantially from the boom with the total assets of UAE banks growing 35 per cent $234 billion.

The UAE banking sector continues to grow in 2007, with total assets reaching $242 billion at the close of the first quarter this year.

Despite the high growth achieved by the UAE's banking sector, Al Tayer said there are some key challenges the sector is likely to face in the coming years. As a result of WTO related pledge, the country has already opened up its market to more foreign banks.

The current state of hyper competition where banks as well as other fin-ancial institutions offer lower pricing to gain market share is putting a squeeze on the margins.

He said that the local banks are facing challenges while competing with their international counterparts due to the relatively small size.

"The mega projects, in infrastructure development, hydrocarbon industry, airline industry valued at over $1 trillion, are far too large for the National banks to take on their balance sheet," he said.

However, he said that the local banks are changing fast to adapt to the new realities.