Abu Dhabi, Nov 22 (IANS) Economic growth rate in the United Arab Emirates will slip to four percent from last year's 7.4 as a result of the global financial crunch, the country's central bank has said.
Governor of central bank Sultan Nasser al Suwaidi said he expected growth to fall because of the global credit crisis and its impact on the domestic banking system, The National daily reported Saturday.
He said the situation 'is putting pressure on everything in the external world. Therefore, that’s going to cause a slowdown in the economy (of the UAE)'.
Suwaidi added that banks would have to make provisions for falling property values, but was confident they would be able to service their debts.
Analysts said a slowdown was inevitable given the current recession in the developed world.
Imran Ahmed, managing director of asset management at Mashreqbank, called the four percent projection 'reasonable growth' in the backdrop of the global crisis.
'The slower GDP growth rate reminds us that the United Arab Emirates is part of the global marketplace. It is subject to the high and low tides of the world economy,' Ahmed was quoted as saying.
The credit crisis has spilled over into the domestic banking sector, with the nation’s largest home loan company, Amlak Finance, announcing last week it had temporarily suspended lending.
Amlak said it was a temporary measure while it reviewed its credit policy. Other lenders have also reduced lending as credit on international markets has dried up.
The central bank has offered cash to banks to boost liquidity and build confidence, but this is yet to lead to any significant increase in lending between banks, the daily said.
The rapid decline of oil prices from this year's peak of $147.27 a barrel in July to below $50 a barrel this week will greatly reduce the oil revenue of the UAE this year, whose oil sector accounted for nearly 36 percent of its GDP in 2007 with 262.7 billion dirhams ($71.6 billion).
The UAE is the fourth largest producer in the Organisation of the Petroleum Exporting Countries (OPEC) with a daily output of 2.7 million barrels.
The global credit crunch has also taken its toll on the UAE's property market, which is an important contributor to the country' s economy.
Property prices fell in October by four percent in Dubai and five percent in Abu Dhabi, for the first time since 2002.
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