Mashreq CEO: UAE economy, banks in rebound mode
FUNDAMENTALS ARE SUPPORTIVE OF OVERALL ECONOMIC RECOVERY
TWe are moving into a stable domain right now. Sentiment is improving, core fundamentals of the economy are also showing healthy signs.
Ahmad Abdelaal | Group CEO, Mashreq
he UAE’s banking sector and the economy are set for a strong rebound in the second half of the current year with sustained growth trends continuing into 2022, Ahmad Abdelaal, Group CEO, Mashreq told Gulf News.
In a wide-ranging interview, the Mashreq Group CEO spoke about the pandemic’s impact on the economy, key sectors and the overall outlook.
“We are still fighting a pandemic. Forecasts are difficult by in these kinds of situations. From what I see, things are improving. We are moving into a stable domain right now. Sentiment is improving, core fundamentals of the economy are also showing healthy signs,” said Abdelaal.
The latest Central Bank of UAE (CBUAE) forecasts of UAE’s GDP growth reinforce Abdelaal’s take on the economy and the banking sector.
The CBUAE has projected the UAE’s GDP growth at 2.1 per cent for this year and is forecast to double to 4.2 per cent in 2022.
“We expect the second half of this year to show a significant improvement over the first half with some main sectors returning to stability. In addition, the data on international investment flows into the country are also very positive,” said Abdelaal.
Foreign investments
In terms foreign capital inflows UAE and Egypt are leading the region.
While economic fundamentals are key to investor confidence, Abdelaal said factors such as ease of doing business and access to the market are key in attracting foreign investments.
The efficient management of the pandemic has also come as a big factor in boosting investor confidence in the country. Global investors see this as a sign to stability.
“The UAE, over the past few months has been working hard to open up the access points for the regional global investors. The facilities the country has offered, whether in terms of liberal residencies, 100 per cent ownership and reduced costs in terms of setting up a business clearly have played a key role in attracting investments into the country,” he said. In the past 18 months, UAE’s banking sector has come a long way from the initial shock of the pandemic with stronger capital and liquidity positions.
“Looking back, clearly banks are in a much better position compared to this time last year. First of all, the way that the regulators intervened has helped. Additionally, the banks too have managed this crisis very well,” said Abdelaal.
The way the banking sector faced this crisis compared to the global financial crisis has completely different. Overall, the responsiveness to the crisis has been fast and efficient.
“As far as Mashreq is concerned, we already had initiated help for our clients even before the Central Bank announced its Targeted Economic Support Scheme (TESS). Of course, the TESS added great deal of depth to the relief programmes throughout the country,” said Abdelaal.
Data shows liquidity and capital structure of the financial sector a whole has remained far stronger compared to 2008 when global financial crisis hit the sector. Although most banks were prepared to withstand the crisis on the standalone basis, the timely central bank support eased pressures on banks and other key sectors.
Asset quality
The CBUAE has indicated that it will unwind some of the pandemic related support measures going forward. “The central bank has taken a gradual approach to exiting the support programme and this has been done in consultation with the banks who have expressed confidence that they are strong enough to manage their finances and continue to support the economy,” said Abdelaal.
While the banks in general have been prudent in making adequate loan loss provisions in the early days of the pandemic, he said the prospects of full or partial recovery of these provisions will be subject to many factors such as legal modalities, economic conditions, and client’s ability to redeem their exposures.