The Gulf credit market is in a comparatively strong position to weather volatility in global markets. The Gulf countries’ rich hydrocarbon resources provide large current account surpluses, making them net exporters of capital, and their external trade patterns are more connected to Asia.
This contrasts with emerging economies in central and eastern Europe, many of which run current account deficits, leaving them dependent on foreign capital to maintain their balance of payments. In addition, their exports are largely dependent on demand from the European Union, where growth is weak and uncertainty is high.
Gulf banks’ balance sheets, particularly in the UAE and Qatar, have much more stable funding profiles compared to their situation in 2008. Liquidity has increased substantially in the past year. Total loan-to-deposit ratios in Qatar and the UAE have fallen below 100 per cent, indicating an ample base of deposits to fund banks’ loan portfolios. The Qatar Central Bank has even taken measures this year to drain some excess liquidity, including selling short-term bills.
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