Central bank sees moderate growth

DUBAI // Banks will have to make further provisions for bad loans this year although its economy will see moderate growth, the UAE's central bank governor said on Wednesday. The global financial crisis sent the second largest Arab economy into a downturn last year and analysts expect Dubai's debt problems to hinder its recovery in 2010. "The situation globally seems to have stabilised, which reflects on the UAE's economy," Sultan Nasser al Suweidi told Al Arabiya television.

"There will not be growth at high levels but there will be growth," he said without giving details. Analysts expected the world's third-largest oil exporter's economy to grow 2.9 per cent this year after a 1.1 per cent fall in 2009, a Reuters poll showed before the UAE's emirate of Dubai asked for a standstill on billions of dollars of debt on Nov. 25. Suweidi also expected banks to book more provisions in the coming months.

"Provisions go up and down depending on the crisis ... we are still in a crisis all around the world, although this has come down significantly, but the crisis still requires more provisions," he said. Restructuring of two Saudi Arabian family firms and $22 billion worth of debt by state-owned conglomerate Dubai World are expected to force UAE banks to write off more of their loan portfolio. The UAE will also see very low inflation levels for an extended period, Suweidi said, after experiencing deflation in 2009.