UAE credit growth slowed in 4th quar­ter

The Pak Banker - - BUSINESS -

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.

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