KUWAIT CITY, Oct 31, (RTRS): The United Arab Emirates will see a slowdown in business because of global economic conditions, the Gulf Arab country’s Central Bank Governor Sultan Nasser al-Suweidi said on Monday. “We will see a slowdown of business due to an expected economic downturn (globally), due to effects of the European crisis and the situation in the US as well,” he told Reuters at a financial forum in Kuwait. “There will be an effect on China. China is the main economy to affect the supply of oil...so there will be impact on local economies of the GCC (Gulf Cooperation Council).” However, Suweidi added that China was growing at a very reasonable speed, so he was not very concerned about a severe slowdown there. The central bank governor also said he was happy with the UAE’s current monetary policy rate of 1 percent. He reiterated that UAE banks’ exposure to sovereign and private sector debt in Europe was “really small”.

The United Arab Emirates needs to find new liquidity tools to ensure its banks will be able to implement new global rules under the Basel III accord, Suweidi said.
Although UAE banks have high capital levels — their average Tier 1 capital ratio is about 11 percent — liquidity rules are expected to be more of a challenge for them, as they prepare to meet the Basel III banking standards that will take effect around the world over several years from 2013.
One reason is that Gulf debt markets are not as deep or varied as developed markets, meaning banks have a limited choice of liquid instruments that they can use locally. Basel III will require banks to hold enough cash-like instruments to withstand a month of severe fund outflows.
Saudi
Meanwhile, Saudi central bank governor Muhammad Al-Jasser said on Monday that he is optimistic Europe’s leaders will take the right measures to tackle their debt crisis.
Speaking at a financial forum in Kuwait, he also said the summit of European leaders last week had sent an important message to markets that the leaders had reached a decision-making phase.

Oman
Oman may in future consider issuing Islamic bonds or sukuk, the country’s central bank head Hamood Sangour al-Zadjali said on Monday.
Zadjali was speaking at a financial forum in Kuwait. Oman opened its doors to Islamic banking in May this year, after previously deciding not to introduce it.
The central bank chief also said inflation in Oman was stable and would be around 4 percent this year.
Inflation accelerated to 5.3 percent year-on-year in August from July’s 4.6 percent, data released this month showed. Analysts said increased social spending by the government appeared to have fuelled a spike in the cost of some items.
Qatar
Qatar’s central bank expects inflation this year of 2.5 percent, central bank governor Sheikh Abdullah bin Saud al-Thani said on Monday.
Consumer price inflation in Qatar edged up to 2.2 percent on an annual basis in September, its highest level since at least the beginning of 2010, but it was still far from a record 15 percent seen in the oil-boom year of 2008.

Turkey
The Turkish central bank is trying to slow down economic growth, internal demand and credit expansion to avoid dangerous imbalances between Turkey and other countries where growth is weaker, deputy central bank governor Mehmet Yorukoglu said on Monday.
“In 2010, (Turkey’s) growth was close to 9 percent. For 2011, we are expecting the rate of around 7 percent year-on-year growth. But we cannot say that this growth is a healthy growth,” he told a financial forum in Kuwait.
“We have very good fundamentals at home. The public sector finances are very healthy, the banking sector is very healthy, productivity and output growth is very strong, but demand imbalances between our economy and the economies we export to may create financial stability risks.
“We have to be more creative and we have to use other tools, macroprudential tools to bring our economy to a more balanced pattern.”

Turkey’s strong growth, combined with much weaker demand in trading partners such as Europe and the United States, is fuelling a huge Turkish current account deficit which the government estimates at 9.4 percent of gross domestic product this year.
This month the central bank hiked its overnight lending rate by 3.5 percentage points to 12.5 percent in an effort to prevent excessive depreciation of the lira. Last Wednesday, central bank governor Erdem Basci said the bank had started monetary tightening to prevent lira depreciation from having a lasting impact on inflation. Yorukoglu’s mention of macroprudential tools referred to efforts to influence banks’ lending behaviour through tools other than interest rates — for example, reserve requirements.
He struck a gloomy note on the ability of policymakers to remove sources of instability in the global economy.

“Let’s assume that sovereign debt problems are resolved successfully without creating any deep recessions and crisis. Will that be over? Are we done? Are we going to be safe? No. Because the main problems, imbalances that created the initial 2008 crisis are still there, even now bigger,” Yorukoglu said.
“If you look at growth differentials between advanced and emerging economies, that differential is increasing and will probably increase even more.”
He added, “If you look at inflation differentials between advanced and emerging economies, that is also widening. Policy interest rates between advanced and emerging economies are also getting wider.
“So under these circumstances, even if we successfully resolve the sovereign debt crisis globally, increasing global imbalances will accumulate further financial stability risks, unless especially emerging economies start using stronger macroprudential tools.”