'Significant portion' of UAE projects to be shelved

SIGNIFICANT PORTION: Moody's said unexecuted projects in the UAE could be put on ice in 2009 due to the global financial crisis. (Getty Images)

A “significant portion” of unexecuted projects in the UAE will likely be cancelled or postponed in 2009 due to the global financial crisis, Moody's Investors Service said on Monday.

The ratings agency said in a report that projects, especially in Dubai and the Northern Emirates, could get shelved due to difficulties raising long-term finance given global constraints in external funding.

Moody's also said a liquidity squeeze in the UAE banking system due to the crisis would see large loan agreements redrawn, restructured or postponed.

“The financial sector of the United Arab Emirates cannot remain immune to the global financial crisis,” the ratings agency said.

It said liquidity in the banking system had weakened the first nine months of 2008 due to an outflow of speculative money, disruption to foreign market funding, substantial irrevocable loan commitments that need to be serviced and the need for refinancing existing corporate debt.

Moody's said loan growth in the UAE was expected to slow, with some banks even showing negative growth.

The banking system will also witness increased pressures on net interest margins due to high borrowing costs, Moody's said, while the UAE central bank will impose stringent regulation in terms of scrutinising loans and advances.

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