euro crisis a threat to uae economy
Last Updated : GMT 02:09:47
Arab Today, arab today
Arab Today, arab today

Euro crisis a threat to UAE economy

Arab Today, arab today

Arab Today, arab today Euro crisis a threat to UAE economy

London - Arabstoday

The IMF yesterday warned that the UAE could face further headwinds from Europe as the crisis on the continent switched focus to Spain.European ministers yesterday discussed a potential rescue package for Spain, which would make it the fourth member of the 17-nation euro zone to seek external funds. The IMF said Spanish banks would need to set aside at least €37 billion (Dh169.97bn), but officials told The Wall Street Journal the number could be as high as €100bn. The news comes as the IMF issued a warning that the UAE could be hit by a worsening situation in Europe. \"A marked spillover of the current crisis of peripheral euro countries into the core euro area and global financial markets could have major financial repercussions for the UAE and the GCC region,\" the IMF said in a report published on Friday. The IMF said the situation in Greece threatened to affect the UAE economy, and warned that the number of non-performing loans at local banks could also rise this year. \"Although financial vulnerabilities of the United Arab Emirates have decreased since the 2008 global real estate collapse, given the UAE\'s interconnectedness, it remains exposed to global financial conditions,\" the IMF said. Dubai was identified as particularly at risk. Greece is the main source of \"contagion risk\" for Dubai, the report added, and said three other European countries posed a risk. \"Italy, Portugal, and Spain are also contributors: these four countries explain close to 80 per cent of the contagion risk to Dubai.\" Paul Gamble, the chief economist and head of research at Jadwa Investment in Riyadh, agreed that the UAE was not immune to the financial woes of Europe. \"Greece poses a big risk to the world economy. And Dubai in particular is exposed to what is going on in the global economy,\" he said. \"You\'ve gone through the worst, but the UAE economy is very much exposed to what is going on in the global economy,\" Mr Gamble added. The UAE banking system is \"moderately exposed\" to the situation in Europe, but does not currently show any signs of distress, the IMF report said. However, the number of non-performing loans (NPLs) is forecast by the IMF to rise. \"The number of NPLs is likely to increase this year, including those resulting from the ongoing restructuring of Dubai Holding … and the distressed real estate companies,\" the report said. \"The concentration of risk in a few banks indicates the need for close supervision of these banks,\" it added. Mr Gamble agreed that the number of non-performing loans was on the rise. \"It\'s natural that, as an economy slows, non-performing loans will increase,\" he said. More than US$100 billion (Dh367.28bn) has been wiped off the value of UAE stock markets since the fall of the US investment bank Lehman Brothers in September 2008, the IMF said. Market-capitalisation losses on the country\'s two main bourses totalled $102bn between September 2008 and the end of March this year, with companies listed in Dubai accounting for nearly 60 per cent of that. Economists said the outlook for the UAE\'s stock markets was bleak. \"I\'m not very optimistic about the outlook for the equity markets,\" said Jarmo Kotilaine, the chief economist of National Commercial Bank in Jeddah. \"Domestic growth drivers - even though they are better than they used to be - are still uneven and not particularly strong.\"from national news.

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