The flow of credit in global markets slowed to a virtual standstill in the aftermath of the banking crisis and has not yet fully recovered, despite intervention by central banks.
But will this year be the year money starts moving freely again? And how have local businesses and consumers been affected? Shukri Dabaghi, the general manager for SAS Middle East, which produces business analytics software, explains.
How does the flow of credit look across global markets?
Right now, it is very difficult to evaluate and review the fluidness of the global system. What remains to be [seen is how it] will continue to be affected by the move in the US towards economic recovery, how the euro zone will address their macro issues at large ... and the ... Chinese economy [will be stimulated by internal demand].
What about the flow of credit in the Middle East?
The 2011 record oil revenues of the UAE [will] continue to provide the government and its central bank with the advantage of supporting the banking sector, thereby balancing risks of over leverage while stimulating consumer credit.
Have we finally sorted out the global economic problems?
Unfortunately, not at the moment.
How has the slowing flow of credit affected the UAE business owner?
Credit is the lubricant of any economic engine - so you can just imagine how the lack of it can create adverse results on sustained growth. Banks today have come to realise that to maintain continued growth, an effort must be made to diversify its customer base into the small and medium-sized enterprise (SME) segment of the economy. This is where we believe the banking sector will be looking to target more efficiently and successfully move forward.
What about consumers?
Looking at it from a long term perspective, consumers are likely to see the positive effects of the improved lending practices of the banking sector. The days of excessive lending practices to individuals have ended.
What will it take for banks to regain confidence in the financial system to get it moving again?
Banks should learn to diversify [their] customer base and start moving towards the SME market. The government should also assist in driving in more growth and investment towards the entrepreneurial establishment of small businesses.
How strong do you expect economic growth will be in the UAE?
Economic experts have pegged the UAE economy to grow at 3.5 per cent in 2012 ... The expected growth comes on the heels of record oil revenues last year, a rapidly growing transit and logistics sector and the revival of tourism inflows. All of these factors show the steps taken to [re-evaluate assets] in the financial sector and real estate sector will improve the likelihood that the UAE will accelerate even further.
