DIFC Deposits Continue To Grow

Warnings for oil consumption and equities markets amidst growth of deposits and loans from DIFC companies.

Deposits have grown at an annual average rate of 39 per cent within the Dubai International Financial Centre over the past three years raising the total volume of deposits to $12.8 billion at the end of Q1, according to new data released on Monday.

Loans and advances have also grown at an average annual rate of 40 per cent to $14.7 billion by the same period.

After a 10.4 per cent decline in 2010, deposits by DIFC companies grew by 75.8 per cent in 2011 and the DIFC expects this to continue. Deposits and credit growth rates of DIFC based companies have been substantially higher compared to those of the GCC area banks.

“2011 was an out of ordinary year due to the Arab Spring,” said Dr. Nasser Saidi, Chief Economist at DIFC Authority. “Companies are joining the UAE and the DIFC as it is a safe haven. That is likely to persist and won’t settle very quickly. The safe haven aspect will be continually important.”

However Dr Saidi admitted the UAE equities market has underperformed.

“The equities markets are our dark cloud; frankly they are not performing their jobs. We should be issuing bonds and sukuks to make the markets grow. We need to develop our bond markets and then we will see a boom.”

The centre’s chief economist also warned of GCC countries abusing their oil supplies for structuring finance instead of issuing bonds, “By 2017, at their current rate, Kuwait will not have any oil left to export. Saudi Arabia will be out of oil by 2035 at their current rate.

“We should be using bonds and sukuks for financing. Oil should be left for future generations – once it’s gone, there’s nothing.”

Dr Saidi said the region had become a hub for investment into Africa and Asia. “There are big advantages to basing yourself in DIFC to manage your investments in Africa, and big tax advantages.

“Investors wanting to go into Asia or Africa are doing so increasingly from the UAE and DIFC. You won’t get much growth in Europe or the United States – growth is in the emerging markets.”