UAE GDP To Grow 5.3% In 2024: S&P
UAE real GDP will grow by 5.3 per cent in 2024, compared to 3.4 per cent in 2023, according to credit rating agency S&P Global Ratings.
In a new report, the credit rating agency said that UAE banks reported exceptional profits for the full year 2023 due to lower provisioning requirements and higher interest margins, in addition to improved liquidity levels as deposit growth outpaced new loan growth.
The report also noted that the outlooks for the banks in the UAE are stable.
UAE GDP forecast
The agency estimates that increased oil production and support from non-oil sectors will drive economic growth in the UAE this year.
The non-oil GDP is likely to continue growing, driven by the performance of the hospitality, real estate, and financial services sectors.
S&P Global Ratings also noted that some UAE banks achieved record profits in 2023 due to strong credit growth in a rising interest rate environment.
In addition, the improved economic environment means that provisioning requirements for new loan losses remained low.
The increase in net profit was also supported by growth in non-interest income, reflecting increased business activity and commercial activity.
Standard & Poor’s expects the US Federal Reserve to cut interest rates by 100 basis points in the second half of the year, noting that given the UAE dirham’s peg to the US dollar, the agency expects the Central Bank of the UAE to follow suit.
The agency believes that interest rates will remain higher for longer, which will support banks’ net interest margins.
Along with largely stable cost of risk, banks’ profitability is likely to remain strong.
The agency also expects retail lending to remain strong as banks continue to expand in this profitable segment.
The agency said that United Arab Emirates banks maintain high liquidity, with the average cash and money market instruments of the 10 largest banks reaching 21.8 per cent at the end of 2023.
Strong core customer deposit bases, which grew by about 12 per cent last year, and limited reliance on external funding contribute to the funding structures of UAE banks.
Standard & Poor’s noted that banks in the country remain in a strong position in terms of net foreign assets, which rose to 27.9 per cent of system-wide domestic loans as of November 30, 2023, from 9.6 per cent at the end of 2021.
