UAE economy to grow 3-4% this year

Liquidity is still an issue, but UAE commercial banks have started lending at a higher rate on stricter terms, the UAE Central Bank Governor said, adding that he expects the UAE economy to grow between three to four per cent this year. Speaking at a seminar in Dubai on Wednesday, Sultan bin Nasser Al Suwaidi, said one of the measures to boost liquidity could be to require banks to hold certain assets in government paper. But this could bring some challenges for the banks as government in this region don’t issue paper. At the same time, he said the regulatory authorities should be given certain legal mandate to issue such paper. He said though the UAE banking sector continues to grow at a slower pace in 2010, it still remains the Arab World’s largest banking sector. He said it was wrong for banks to issue credit at exponentially high rates between 2005 and 2008. “We believe that we should issue regulations to slow (such high) credit growth rates, so that we can then accelerate during a slowdown.” Al Suwaidi said the loan growth would be also reasonable under the circumstances. “No loan portfolio will grow at the same rate as they used to long time ago or achieve the same growth rate of 2007-08.” The IMF also nearly doubled its growth forecast for the UAE economy to 2.4 per cent for 2010 from 1.4 per cent in its previous estimate. While the Ministry of Economy has projected growth of about 2.5 per cent for the current year. He said the Central Bank doesn’t free Iranian accounts but has given local banks free hand to implement sanctions announced by the United Nations Security Council.