Dubai: Earnings of companies in the UAE, weighed down by the oil price slump and sluggish economy, witnessed a significant decline during the first six months of the year, according to the latest analysis.
Corporate incomes for January to June this year posted an 8 per cent drop - one of the highest in the Gulf Cooperation Council (GCC) region - compared to the same period in 2015, Kuwait Financial Centre “Markaz” said in its report sent to Gulf News.
The slowdown is forecast to continue for the rest of the year, as credit growth is likely to impact incomes of banks. According to M.R. Raghu, senior vice president for research at Markaz, two of the UAE’s largest sectors, banking and real estate, took a hit in the first half of the year, declining by over 7 per cent and 4 per cent, respectively.
“Lower credit growth and slump in real estate sales are key attributes to the same. Low oil prices have definitely had impact in the economy in the form of lesser liquidity for banks and the subsequent effect percolating through the rest of the business sectors,” Raghu told Gulf News.
Raghu said the rest of the year will remain challenging for UAE businesses, especially for banks. “We still have to wait and see how oil prices play out in the early part of 2017 before taking a call on when UAE companies can get back to positive net income growth trajectory.”
Across the GCC, corporate incomes fell by 8 per cent year-on-year. Saudi Arabia recorded a decline of 7 per cent in net earnings, while Kuwait and Qatar recorded declines of 6 per cent and 11 per cent, respectively.
Markaz attributed the fall in earnings to the energy slump, weak economy and poor performance of real estate companies. Earnings in the UAE’s real estate companies, in particular, incurred a 4 per cent decline, as property prices dropped owing to poor business sentiments and stagnant sales.
“We expect UAE corporate earnings to fall by 3 per cent, as subdued credit growth is expected to take a toll on banking sector earnings in [the second half of 2016} and on expectations of further earnings contraction in real estate sector,” Kuwait Financial Centre said.
