Bmi's United Arab Emirates Commercial Banking Report

BMI's United Arab Emirates Commercial Banking Report provides independent forecasts and competitive intelligence on United Arab Emirates's commercial banking industry.

We forecast real economic growth to dip slightly in 2009, as the impact of lower oil prices and rising concern over the sustainability of the United Arab Emirates (UAE)'s property market boom kick in. That said, we are not forecasting anything approaching a recession and still see growth coming in at 4.6%, which is impressive given the global economic climate. From 2010 onwards, our current forecast is for a slight rebound in oil prices and an improvement in US and European growth, which will buoy confidence generally. In the Gulf, we expect the UAE, and Dubai in particular, to continue in its pursuit of diversification. While the Emirates' quest to become a regional financial leader leaves it vulnerable to contagion from global financial conditions, we believe that there are still growth opportunities, in the Islamic banking sector for example, while the UAE will continue to benefit from its position as the Gulf's major trade hub.

This report is being written at a time when the global financial crisis – which arose as a result of the evaporation of inter-bank liquidity – has moved into a new phase. Stock market participants appear – reasonably – to have taken the view that the policy responses taken by governments, central banks and multi-lateral institutions will be sufficient to prevent a total collapse of the global financial system. Instead, stock market participants are focusing on the impact of a (near)-global recession on the earnings of non-financial companies.

The number and size of stand-by facilities agreed by the International Monetary Fund (IMF) since early mid-October 2008 supports our view that, of the emerging markets whose commercial banking sectors are surveyed by BMI, the countries of Central and Eastern Europe (CEE) are those whose economies are most at risk of suffering adverse affects as a result of the global financial crisis. This is partly because the macro-economic imbalances are relatively severe and partly because the Central and Eastern European countries are more directly affected by the brutal recession that is unfolding in wealthier member states of the European Union.

As yet, it has not been possible to collate hard numbers for most of the countries whose commercial banking sectors are surveyed by BMI, that clearly quantify the impact of the global financial crisis on the banks. As we explain in the section that discusses changes that we are making to the report, we again include a lengthy essay which attempts to identify the key issues. In essence, in the emerging markets (and, indeed, the developed countries) of the Asia-Pacific, commercial banks appear to be well placed to deal with the crisis. The same is, broadly, true of commercial banks in the various