UAE credit growth slowed in 4th quarter
The domestic credit growth decelerated 2.3 per cent quarter-onquarter in the third quarter of 2015 to 1.1 per cent in the fourth quarter of the year, reflecting a downward trend in credit appetite at banks, a Central Bank of the UAE report said.
"Overall banks remain liquid," as evident by the ratio of liquid assets to total assets, it said. However, the government revenues dropped 20.8 per cent in the first three quarters of the 2015, says the Central Bank of the UAE in its latest quarterly review on the economy.
According to the Central Bank forecasts, the real GDP is estimated to expand by 3.1 per cent in 2015, following an average of 4.8 per cent growth achieved during the period 2000 - 2014. The slowdown in 2015 is due to the decline in oil-GDP growth which represents more than 35 per cent of total GDP, mostly linked to the fall in oil prices.
The oil-GDP slowed down from four per cent in 2014 to 2.2 per cent in 2015, in line with a persistent drop in oil price. The Brent price decreased on average by 43 per cent, in the fourth quarter of 2015 compared to the same period of the previous year. The growth in 2015 is mainly due to the resilience of the non-oil activities, which are expected to grow by 3.7 per cent.
The Central Bank's estimates for the UAE show a resilient growth, driven by the non- oil activities which are expected to grow by 3.7 per cent in 2015, while oil-GDP is expected to grow by 2.2 per cent. Also, CPI inflation year- on- year slowed down to 3.6 per cent in Q4 of 2015 due mainly to a slowdown in housing and lower imported inflation, on account of continued strengthening of the dirham.
At the fiscal level, the dipping oil prices led to a fall in government revenues by 20.8 per cent in the first three quarters of 2015 compared to the same period of the previous year, while public expenditures declined by 13.9 per cent over the same period. The general government deficit increased by 114.6 per cent compared to the second quarter as it changed from a deficit of Dh8.9 billions to a higher deficit of Dh19.1 billion.
It is noteworthy that this fiscal balance does not take into account the revenues generated by ADNOC transfers and government investments. This deterioration is due to a further decrease of oil revenues that is more proportional than the expenditure cut. The revenues declined by 23 per cent compared to the second quarter, while total expenditures declined only by 9.9 per cent. On a year- on- year basis, the revenues decreased by 31.5 per cent during the third quarter with an important decline of taxes by 44.5 per cent.