Abu Dhabi Beating the Credit Crunch

At a time when many nations in the world are fearful of the credit crunch, it appears that Abu Dhabi is resisting the trend.

At a time when many nations in the world are fearful of the credit crunch, it appears that Abu Dhabi is resisting the trend. One major local property developer is reporting Q3 profits three times more than a year ago and expectations are that the trend will continue next year, according to a recent Reuters survey.

Abu Dhabi is part of United Arab Emirates (UAE), a federation of seven Middle Eastern states on the Persian Gulf. Abu Dhabi city is the capital of the UAE. Although it is one of the world’s largest producers of oil, Abu Dhabi has recently been trying to diversify its economy into other sectors such as the property and tourism markets.

There are other reports which support the Reuters findings. In recent weeks, the government has pumped US$33 billion into the banking system. Fitch Ratings recently expressed its approval of the government’s moves to guarantee liquidity in the banking system and it believes it will be unnecessary to downgrade the emirate’s Long-term Issuer Default Rating.

“The risks of a UAE bank suffering a capital markets-driven liquidity crisis are limited as none of the banks are reliant on these markets. Their funding bases are predominantly based on retail and corporate deposits, with the balance as inter-bank borrowings and some limited debt capital market issuance,” says the Director of Fitch’s Banks team, Robert Thursfield.

According to James Gonzalez, Market Analyst at Obelisk, guaranteeing liquidity is an important issue for Abu Dhabi. “In contrast to Dubai, where the earliest off-plan investment opportunities saw completion in 2002, the first completed units in Abu Dhabi will only be delivered in late 2009. Abu Dhabi remains a relatively new option for foreign buyers and lacks the market saturation of Dubai. It still remains an emerging market.”

News submitted by Alison Kane, Obelisk International