UAE Banking Sector 2023 Outlook: Slower Growth, Strong Fundamentals

S&P Global Ratings expects the UAE?s economic growth to slow modestly in 2023 due to OPEC- agreed oil production cuts and deceleration in the non-oil sector due to higher interest rates. Along with tighter monetary policy, this will lead to lower credit demand and growth for banks. We believe the rise in residential real estate prices will also likely moderate in 2023 after a strong 2022. In this context, we think the deterioration in asset quality indicators will be marginal, and banks? profitability will continue to improve on the back of higher rates. Banks will also continue to benefit from stable and strong capital buffers, good funding profiles, and expected government support.

...As oil-linked activities will shrink on the back of OPEC-agreed cuts, we expect real GDP growth to slow in 2023. The positive performance of some non-oil sectors, including tourism, hospitality, and manufacturing will drive non-oil economic growth, albeit slower than last year....

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