The US investment bank Morgan Stanley has joined the growing chorus of those seeing early signs of an economic recovery in the UAE. In a research note, the bank described as "positive" recent UAE Central Bank data showing modest loan growth and higher government deposits. "Overall we are seeing the growth in the right areas," said Daniel Cowan, a Morgan Stanley analyst in Dubai. The Central Bank's data showed that loans and advances increased 0.8 per cent last month, compared with the previous month, to more than Dh1 trillion (US$272 billion). In addition, government deposits rose more than 5 per cent.
"It is good to see government deposits up 5 per cent month-on-month and take some of the heat off of the private sector," Mr Cowan said. Government deposits were down 10 per cent on the year. However, deposits overall grew for the third month in a row and had reached their highest level in more than a year. Other analysts have also commented that UAE banks appear to be slowly returning to health. Banks remained cautious about lending, but there was a "slight misperception" in the market that they were not lending at all, Mr Cowan said. He noted, however, that while the rate of asset deterioration slowed, provisioning levels for non-performing loans remained at a four-year high of 4.8 per cent. "We need to see improvement in asset quality," he said. Mr Cowan stopped short of backing the view of Sheikh Mohammed, Vice President of the UAE and Ruler of Dubai, who said this week that Dubai was "back".
Mr Cowan said he would defer judgment. "Let's wait and see," he said. "We don't get a lot of details, so drawing strong conclusions is always going to be dangerous."