Moody’s Investors Service revises outlook for UAE banks to positive from stable

(MENAFN) Moody's Investors Service has revised its outlook for United Arab Emirates banks to positive from stable, citing the country's robust economic expansion fueled by diversification efforts.

According to a report released by the rating agency on Wednesday, the United Arab Emirate's real gross domestic product (GDP) is projected to grow by 4.6 percent in 2024, up from 3.1 percent in the previous year. Additionally, the non-oil economy is expected to expand by an estimated 4.5 percent in 2024, further bolstering the performance of banks operating in the country.

The positive outlook reflects Moody's confidence in the United Arab Emirate's economic resilience and its ability to sustain growth momentum amidst global economic uncertainties.

The Emirates' economy rebounded strongly from the impact of the Covid-19 pandemic, posting a remarkable growth rate of 7.9 percent in 2022, the highest in 11 years. This growth trajectory has continued, with the United Arab Emirates economy expected to grow by 5 percent in the current year.

Key drivers of economic growth include robust expansion in the non-oil sector and a significant increase in foreign direct investment (FDI). Minister of Economy Abdulla bin Touq highlighted the United Arab Emirate's achievement of a historic milestone, with the non-oil economy now accounting for 73 percent of the country's GDP. This diversification away from reliance on oil revenues has contributed to the United Arab Emirate's economic resilience and growth prospects.

Moody's expects banks in the United Arab Emirates to benefit from continued economic expansion, with borrowers' repayment capacity supported by sustained growth. The rating agency anticipates banks' capital buffers to strengthen further, driven by stable bottom-line profitability. Loan performance is also expected to remain stable, with problem loans projected to stay within the range of 4 to 5 percent of total loans.

Overall, Moody's outlook upgrade underscores the positive trajectory of the United Arab Emirates banking sector and its resilience in the face of economic challenges. The continued focus on economic diversification and investment in non-oil sectors bodes well for the country's long-term economic stability and the performance of its banking industry.


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