The UAE enjoyed a good financial position in 2011 while its banks managed to make higher profits despite an increase in bad loan provisions, the central bank governor was quoted on Monday as saying.
Sultan bin Nassir al Suwaidi said the UAE’s economy, the second largest in the Arab world after the Saudi economy, recorded good growth last year despite what he described as a difficult global environment.
“The UAE managed to have a good year in 2011 despite a difficult international Environment… it achieved an overall balance of payments surplus and respectable growth while maintaining a low inflation environment,” he said in a foreword to a new Central Bank report on the UAE financial stability.
The UAE’s real GDP grew by around 4.2 per cent in 2011 compared with 0.9 per cent in 2010 and a contraction of 3.3 per cent in 2009 due to lower oil prices.
The country’s fiscal balance, which had a deficit of 2.2 per cent of GDP in 2010, reverted to a surplus of about 2.9 per cent in 2011 after crude prices surged to their highest average of nearly $105 a barrel.
Banks appeared to have benefited from higher growth in the UAE as most of them made higher profits despite an increase in non-performing loan provisions.
Central Bank figures showed provisions allocated by the UAE’s 51 banks totalled nearly Dh19 billion in 2011 and the first half of 2012. At the end of June, provisions reached a record Dh63 billion.
“Thanks to ample capital and satisfactory profitability, UAE banks were able to weather the impact of a further increase in non-performing loans and constitute additional provisions,” Suwaidi said.
He said liquidity remained at an acceptable level as demonstrated by banks investing nearly Dh80 billion in the Central Bank’s certificates of deposits by the end of 2011.