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UAE GDP to grow by 5.3 percent in 2024: S&P Global

Fri 09 Feb 2024    
| 2 min read

Abu Dhabi: Leading credit rating agency, S&P Global Ratings, expects the UAE GDP to grow by 5.3 percent in 2024. This is better compared to 3.4 percent in 2023.

The agency said UAE banks reported exceptional profits for 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.

The agency estimates that increased oil production and support from non-oil sectors will drive economic growth this year. The non-oil GDP is likely to continue growing, driven by performance of the hospitality, real estate, and financial services sectors.

S&P Global Ratings noted UAE banks got 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. It noted 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, UAE 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 UAE banks maintain high liquidity, with the average cash. It also added money market instruments of the 10 largest banks reaching 21.8 percent at the end of 2023. Strong core customer deposit bases – which grew by about 12 percent last year – and limited reliance on external funding contribute to the funding structures of UAE banks.

Standard & Poor’s noted that UAE banks remain in a strong position in terms of net foreign assets, which rose to 27.9 percent of system-wide domestic loans as of 30th November 2023, from 9.6 percent at the end of 2021.

Also read: DIFC’s H1 2023 performance strengthens Dubai’s position as a global finance and innovation hub

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