Regional economies are expected to face tightening funding options this year as bank deposits continue to wither amid lower oil prices, according to the rating agency Moody’s.
Deposit growth rates slowed to 3 per cent in the GCC last year from about 10 per cent in 2014, the agency said in a report published on Wednesday, warning that money was likely to remain tight in 2016 and might become tighter if governments are less willing to spend as deficits widen.
That would limit the ability of companies to grow and act as a dampener on economies around the region, it said.
“The widening gap between oil prices and fiscal break-even prices across GCC governments has resulted in a significant increase in some of these governments’ deficits, which has weakened their own creditworthiness,” analysts at Moody’s led by Nitish Bhojnagarwala wrote in the report.
“In turn, these developments also highlight the reduced capacity or possible willingness of these governments to support both the broad economy and the banks in times of stress, if needed.”
Deficits in countries in the region, including the UAE and Saudi Arabia, have widened over the past year as the more than 60 per cent drop in oil prices empties coffers and forces governments to dip into sovereign wealth funds and borrow more money to keep spending on infrastructure and social services.
Some countries have been more affected than others according to how dependent on oil they are. At the top of the list of those reeling the most from lower oil prices is Saudi Arabia, while the UAE leads those that are least dependent.
UAE banks, for instance, have some advantages relative to their peers because of a more diversified economy and macro-prudential measures taken by the country since the financial crisis of 2008, the rating agency said. Still, deposit growth at UAE banks is likely to slow this year to 3 per cent from 10 per cent annually between 2012 and 2014.
Moody’s noted, however, that UAE government borrowing has only moderately increased despite declines in credit growth and that within the Emirates, Dubai would be most resilient to lower oil prices because of its even more diversified economy.
“Within the UAE, the non-hydrocarbon and private sector-driven growth of Dubai is expected to be resilient to lower oil prices to some extent and this will support the overall financial fundamentals of Dubai-based banks, which were impacted the most during the global financial crisis,” Mr Bhojnagarwala said.
Nevertheless, strains are starting to appear in parts of Dubai’s economy.
The Dubai Economy Tracker, a monthly assessment of business activity in the emirate provided by Emirates NBD, recorded a score of 48.9 in February. Any score below 50 indicates that the economy is contracting.
mkassem@thenational.ae
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The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
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Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
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The Cairo Statement
1: Commit to countering all types of terrorism and extremism in all their manifestations
2: Denounce violence and the rhetoric of hatred
3: Adhere to the full compliance with the Riyadh accord of 2014 and the subsequent meeting and executive procedures approved in 2014 by the GCC
4: Comply with all recommendations of the Summit between the US and Muslim countries held in May 2017 in Saudi Arabia.
5: Refrain from interfering in the internal affairs of countries and of supporting rogue entities.
6: Carry out the responsibility of all the countries with the international community to counter all manifestations of extremism and terrorism that threaten international peace and security
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In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
The National Archives, Abu Dhabi
Founded over 50 years ago, the National Archives collects valuable historical material relating to the UAE, and is the oldest and richest archive relating to the Arabian Gulf.
Much of the material can be viewed on line at the Arabian Gulf Digital Archive - https://www.agda.ae/en
The specs
Engine: 6.2-litre V8
Transmission: ten-speed
Power: 420bhp
Torque: 624Nm
Price: Dh325,125
On sale: Now
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
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Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
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UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
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Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia