We’re in stage two
The UAE government is in its second stage of dealing with the financial crisis, said the Ministry of Economy. It can’t come soon enough.
April 9, 2009 1:24 by kippreport
The UAE government is keeping a close watch on bank liquidity as part of the second phase of its plan to protect the economy from the effects of the global crisis, reported The National on Thursday.
“We are taking things in stages,” Sultan Al Mansouri, the UAE’s Minister of Economy said in Abu Dhabi on Wednesday. “The first stage was understanding the size of the need for a liquidity injection into the banking system. The second phase is to evaluate our performance in terms of banking, in terms of trade, in terms of the economy as a whole, in the first quarter of 2009.”
A committee meets every week to monitor the nation’s economy, and has already begun distributing $32.67 billion (AED120 billion) among banks. In September 2008, the government set up a $13.6billion (AED50 billion) fund to help boost liquidity, and later assured residents that local bank deposits in the UAE will be guaranteed. In October, it pledged another $19 billion (AED70 billion).
The news comes after Moody’s gave the region’s property sector a ‘negative outlook’ for the next 12-18 months in its report titled Arabian Gulf Real Estate Market Industry Outlook, due in part to lack of credit and low consumer confidence.
“The primary stimulus has been via shoring up the banking system, so that liquidity can be extended to all market participants,” Martin Kohlhase, a lead analyst for Gulf real estate in Moody’s Corporate Finance Group told Emirates Business. “As such, there has not been too many direct or immediate supportive actions with an impact on real estate sector.”
In February 2009, the Dubai government sold bonds worth $10 billion, part of a $20 billion program, to the UAE central bank in order to assist state-owned companies raise capital.
In spite of the government’s measures, the nation’s economic growth dwindled since the financial crisis hit the region. Real estate prices have fallen between 30-35 percent, and oil prices have tumbled over a $100, from a high of $147.27 in July 2008 to an average of $47 today.
In March, the Al Mansouri told Al-Bayan newspaper that the UAE economy may contract, although it “depends very much on the world economy and what will happen in the second half of 2009.”
He made the announcement days after Standard and Poor’s estimated that Dubai’s economy will shrink by 2 to 4 percent in 2009.