The Finance World Magazine| Edition: March 2023

UAE Banking
FAB foresees a
relatively moderate
inflation forecast in
2023, which should
provide welcome
stability given the
macroeconomic
backdrop.
growth in our international revenue. We
are also proud to see our achievements
being recognised externally, having
recently been awarded Best Consumer
Digital Bank in the UAE, Most Innovative
Bank, and Best User Experience Design
at the Global Finance Awards,” she
continued.
“As the UAE enters the Year of
Sustainability, we continued to play
a crucial role in helping to deliver the
region’s sustainable finance agenda,
with FAB facilitating over $9B worth
of sustainable projects, in line with
our $75B target by 2030. We also
made steady progress in rolling out
sustainability-linked products across
all customer groups and reaffirmed our
leadership position in the Green Bond
market, with around half of our 2022
issuances executed in a green format
across several different currencies,”
she added. “We remain confident in
the resilience of this region and are
very well placed to capitalise on the
opportunities to drive superior and
sustainable shareholder returns in 2023
and beyond,” she concluded.
On the other hand, Global markets
experienced a particularly difficult year
in 2022, with strong downward pressure
brought on by inflation that reached
levels unseen in decades, increasing
interest rates, tighter liquidity, and
escalating geopolitical tensions. Bond
rates spiked as a result, and equities
experienced a bear market that lasted
through the end of the year. The picture
for 2023 is still uncertain, especially
because continued worries about a
decline in the global economy still exist.
In contrast, the UAE economy
experienced its highest expected real
GDP growth in more than a decade
(+6.7%), owing to higher oil output,
relatively moderate inflation, targeted
structural reforms to drive economic
growth and diversification, and a
recovery across key economic sectors
such as real estate and tourism. This was
clearly reflected in the strength of the
PMI, which remained in growth territory
throughout the year, highlighting the
UAE’s solid economic performance.
As a result of increasing interest
rates, according to the bank’s press
release, the UAE banking sector saw a
significant improvement in profitability,
driven by an increase in margins and net
interest income. Although loan growth
has been high this year, it is expected to
slow in 2023 as GDP growth moderates.
Higher oil prices bode favourably for
deposit inflows, as liquidity remains
plentiful and strong.
Sectoral asset quality remains strong,
while capital balances at UAE banks
remain strong, aided by conservative
regulatory standards compared to
global counterparts. Overall, UAE
banks are well positioned to benefit
from the tailwinds of rising interest
rates and solid regional economic
development, while also being able to
handle any turbulence and obstacles
that may arise in the future.
In comparison to many other regions
of the world, FAB foresees a relatively
moderate inflation forecast in 2023,
which should provide welcome stability
given the macroeconomic backdrop.
The area, however, will not be immune to
global price pressures and an economic
slump. As a result, the bank predicts a
relatively modest real GDP growth rate
of roughly 5.0% for the UAE in FY’23,
albeit this growth should be more
sustainable as economic diversification
continues.
12 www.thefinanceworld.com March 2023