Bank lending is only one way to finance an economic recovery, and arguably for Dubai the recovery will be all the more solid without it. However, the rating agency Moody’s downgrading of Emirates NBD, Commercial Bank of Dubai and Mashreqbank – with Dubai Islamic Bank on a watchlist – is a reminder that the bad debts of the last boom continue to weigh on the Dubai economy.
Moody’s highlighted non-performing loans of between 15 and 17 per cent at the close of 2011 compared to the GCC average of just 6.1 per cent. Its report said problem debts would stay high because of large, stressed, government-related debt restructuring. Almost $50 billion of restructuring is due between 2014 and 2016.
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