The UAE accounts for about 50 per cent of the redemptions coming up in the GCC in the next few years. The deliverables are expected to peak in 2011, according to a top official of Credit Suisse.
Addressing participants at the Credit Suisse Research Roundtable, Kamran Butt, Head of Middle East Equities Research, Private Banking, said while the next few years will see several debt and loan maturities, about $70 billion (Dh257bn) worth redemptions are to take place in 2011 and another $60bn worth in 2012 whereas the current year accounts for about $40bn.
Talking about the state of the overall economy in the region, Mohamad Hawa, Head of Mena Equity Strategy, said it will take at least two more quarters before signs of bullish trends emerge in the region. "However, a lot depends on the banking sector when it comes to recovery," he added, stating that margins have shrunk and loan growth has been subdued in the banking sector.
Hawa said things would improve for banks next year with non-performing loans (NPLs) set to show a decline and growth in loans expected to start next year. Backed by structural advantages and robust fundamentals, the Middle East and North Africa is expected to record sustained gross domestic product (GDP) growth rates over the medium to longer term, according to Credit Suisse.
Butt said stable oil prices and improved business confidence will be the major catalysts for a robust rebound in GDP growth in 2010. "While the region is set to see improved economic conditions across all markets, the growth in GDP will not be evenly distributed with Qatar leading in 2010," he added.
Explaining the region's diverse investment terrain, Hawa said Abu Dhabi banks looked attractive and Qatar was a preferred market due to its high economic growth. Egypt reflected strong fundamentals and an under-leveraged economy, but was weighed down by slowing foreign direct investments and rich valuations. "Overall, Middle East banks have outperformed their global peers, year-to-date, with Saudi banks returning 9.5 per cent. This is much better than the negative two per cent returned by MSCI emerging market banks," he added.
Hawa said the impact of the global financial crisis has been limited in Qatar due to timely and supportive macroeconomic policies and intervention in the local banking system. He said the main risks to the short-term economic outlook are unexpected construction delays, a considerable negative external demand shock, lower hydrocarbon prices and a further decline in real estate prices.
"Overall, the current account balances of oil-exporting countries are expected to benefit from improved oil prices. Oil demand has started to recover in emerging markets as well as in industrialised countries, which should be supportive for prices in the long run. However, deleveraging and de-risking remain a risk for prices in the near term," he added.
According to Butt, strong external and fiscal positions prior to the recession allowed GCC economies to implement measures in response to the downturn. When the shadow of the financial crisis swept the region, almost all countries provided liquidity support, while a majority of them opted for monetary easing, with Saudi Arabia, the UAE and Kuwait guaranteeing deposits, he added.
Hawa said during the financial crisis, the region's real growth was affected. "Exports from Middle East and Africa suffered from weaker global demand, declining significantly in 2009. Exports from the UAE and Saudi Arabia make up more than 40 per cent of the region's exports," he added.
By CL Jose
© Emirates Business 24/7 2010
