UAE banks remain stable despite subdued economy

The UAE’s banking system was given a ‘stable’ rating despite the country’s subdued economic growth, according to a recent report from rating agency Moody’s.

Moody’s has forecast that real GDP growth will reach 1.7% in 2019 and 1.4% in 2020, a minor decline on the 1.7% growth in 2018 but far less than the 4.8% annual growth enjoyed between 2011-2016. 

Nevertheless, Moody’s analysts believe that the UAE’s financial institutions have a resilient enough credit profile to withstand the effects of a slowing economy.

“Banks’ strong capital, stable funding and healthy liquidity balance weakening asset quality and softening profitability amid steady but subdued economic growth,” said Mik Kabeya, AVP-Analyst at Moody’s.

The UAE has also been given a stable economic outlook by the National Bank of Kuwait (NBK). The central bank notes the headwinds caused by a slowing economy, falling oil prices and global trade disputes but also references structural reforms from the UAE government designed to improve the investment climate.

“A new investment law was recently issued to loosen foreign ownership requirements, and Dubai and Abu Dhabi have adopted several initiatives to support SMEs including supporting business accelerators and easing financing,” said NBK Group Chief Economist, Dr. Saade Chami.

©2019 funds global mena

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