UAE economy growth at 3-4% 'reasonable' - cenbank gov

Sultan Nasser al-Suweidi says liquidity could be enhanced by requiring banks to hold more government papers
UAE economy growth at 3-4% 'reasonable' - cenbank gov
Sultan Nasser al-Suweidi.
By Reuters
Wed 13 Oct 2010 11:45 AM

Economic growth in the UAE at a rate of 3 to 4 percent would be reasonable under the current circumstances, the Gulf oil producer's central bank governor said on Wednesday.

The UAE economy ministry sees GDP growth of 2.0-3.2 percent in 2010 based on oil price projections of $75-85 a barrel.

Analysts polled by Reuters last month slightly improved their forecast for economic growth in the UAE this year after concerns over debt restructuring in Dubai eased.

GDP growth was seen at 2.4 percent this year, up from 2.1 percent forecast in June.

Following are remarks by Sultan Nasser al-Suweidi at a financial conference:

ON ECONOMY

"The UAE is a part of the global economy. The UAE (growth) will be reasonable under the circumstances, something between 3 to 4 percent."

ON DEPOSITS

"Deposits are coming to the UAE, and indeed to other GCC (Gulf Cooperation Council) countries at a higher rate, which puts pressure on the spreads."

ON LOCAL DEBT MARKET

"One way liquidity could be enhanced is through requiring banks to hold ... (more) government papers."

"This requirement, however, presents some challenges as governments do not issue enough paper. A large effort should be exerted through governments ... in developing and emerging economies, and in countries such as the UAE to create such markets."

ON CREDIT GROWTH

"One of the goals of the central bank is to maintain credit extension in the economy, growing at a reasonable rate."

"UAE bank's credit portfolio grew at the rates of 37.7 percent in 2005, 36.1 percent in 2006, 34.3 percent in 2007 and during the crisis year at 41.1 percent."

"When the crisis hit, banks stopped extending credit to customers."

"Loan growth will be reasonable under the circumstances, no bank credit portfolios are growing at the same pace they used to a long time ago. So you will not see these growth rates of 2007 through to 2008."

"We believe it is wrong to grow banks' credit portfolios at the high percentages we've seen from 2005 to 2008, and at the same time it is equally wrong to slow down to the present time rate of growth."

"We believe we should issue new regulations to slow down the credit portfolio growth when it reaches a certain rate so that people have space to grow at a higher rate."

ON GLOBAL CRISIS

"The U.S. economy is under pressure but I think we have gone through the stage where we could be affected by a new crisis. I don't see that a new crisis could affect our market again."

ON DOLLAR PEG

"We have been pegging our currencies to the dollar since the late 70s. We have had very, very good experiences in most times and our economies benefited linking to the U.S. dollar over that period."

"Sometimes of course there would be some pressure and the dirham is a bit weaker than it should be, sometimes it seems stronger than what it should be and the business community would always complain. And you also have complaints from those going to Europe in summer."

ON NEW REGULATIONS

"It's true that our real estate markets are not well organized in the UAE and not one unit, they are different units."

"We are going to come up with new regulations to regulate credit extension, for example, (for) mortgage loans. You will see new regulations coming which will make it easy for individuals to have a sound financial position."

ON GULF MONETARY UNION

"We have opted out of the monetary union. The GCC has to learn from the European experience, it did not work as well. Now, after the events in Europe they need to rethink, they need to reengineer. I think there are uncalculated risks."

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