|By Arabian Staff| Loan defaults and business owners fleeing the country leaving behind huge debts are becoming a routine affair in Dubai and other parts of the UAE, observers point out.
According to EmiratesNBD, an increasing number of SME owners are being forced to flee and somewhat draws a parallel with the situation in the aftermath of the 2009 financial crisis. The problems of a slowing economy are faced more by small businessmen, it points out.
Chairman of the UAE Banks Federation and CEO of Mashreqbank, Abdul Aziz Al Ghurair, the other day suggested that the defaults in the SME sector may hit AED5 billion.
The Central Bank has also indicated the possibility of the situation getting worse. Liquidity conditions in the U.A.E. are expected to become tighter over the next few months, according to the Central Bank quarterly report. Credit standards and risk premiums for loans rose for a third consecutive quarter and will continue to do so in the final three months of the year, it said. The UAE’s interbank lending rate has risen to the highest since July 2013, according to central bank data on Bloomberg.
The problem of skips was at its pinnacle in 2009 and 2010, when the financial crisis pushed the economy into recession and forced several state-owned to lay-off workers and restructure billions of dollars of debt. That’s not the case now: growth in the United Arab Emirates is moderating but not slumping, with expansion of 3.5 percent this year, according to the median estimate of nine economists compiled by Bloomberg. That’s down from about 4.6 percent last year.