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Emirates: The agency “Standard & Poor’s Global” credit ratings said, Tuesday, that the shocks of 2020 will continue to weigh on the economy and the banking sector in the UAE, amid declining asset quality and increasing the cost of risk for local banks.
In a report, the agency expects banks to be affected by the UAE Central Bank raising the facilities it announced in order to gradually mitigate the effects of the Corona pandemic in the second half of 2021.
Last year, the Emirates Bank announced the provision of a portfolio of low interest facilities for the economic sectors affected by the Corona pandemic, as well as postponing installments based on borrowers from banks operating in the country.
And the report continued: “Due to the low interest rates, the profitability of banks will remain low in 2021, as some banks are likely to record losses.” Sectors such as real estate, hospitality and retail are likely to remain under pressure during the current year.
The agency’s estimate and international institutions such as the International Monetary Fund indicate that the UAE’s GDP growth has recovered this year, after the severe recession in 2020, due to the Corona pandemic and the drop in oil prices.
The agency believes that real GDP (denominated in dollars) will return to 2019 levels, by 2023.
UAE banks were dealt a double blow due to the repercussions of the Corona virus and the drop in oil prices, in addition to the impact of major sectors such as tourism and real estate.
48 banks operate in the UAE, including 22 local banks and 26 foreigners, serving more than 9.5 million citizens and residents.