Tiny Iran war relief vs huge Covid aid reflects limited economic impact, says Al Ghurair

The Dh6.2 billion ($1.69 billion) relief for bank customers in the UAE is nothing compared to the Dh200 billion in assistance the UAE Central Bank extended during the Covid pandemic, reflecting the far smaller impact of the current crisis on the country's economy, the UAE Banks Federation chairman Abdul Aziz Al Ghurair has said. The total number of 65,000-plus customers who sought assistance due to the impact of the Iran war since the beginning of March also pales in comparison with the number of entities in the UAE that were affected by the pandemic-driven economic slowdown, Mr Al Ghurair said during a media briefing on Wednesday. “During Covid time, the relief went to 1.5 million entities, and now it's 65,000 – it’s nothing, it's meaningless. It's no relief for the size [of the economy],” he said. “And during Covid, relief was Dh200 billion. Now that's huge. The current [figure, Dh6.2 billion] is just 3 per cent.” The impact so far has been far less in every way because the government, emergency services and banks were all “better prepared”, though “we never thought this would happen”, said Mr Al Ghurair, who is also chairman of Mashreq , one of the oldest Dubai lenders. The financial sector remains resilient, with banks posting some of the best quarterly results in "recent history", though banks will have to adjust "certain growth projections for certain sectors", he said. "But overall, we've seen a lot of demand." "The question was, did we see a lot of money moving out? We hardly saw any money move. The money is still coming in," he said. "And even with the support package, the central bank ... they gave us no money, they gave us nothing compared to Covid time." Play 00:47 Dr Sultan Al Jaber: We emerged from Iran war stronger On March 18 the banking regulator approved its resilience package, with lower liquidity ratios and capital buffers, to reinforce the stability of the UAE banking sector and mitigate the impact of the war in the Middle East . Last week, the UAE Central Bank said that more than 65,000 business and individual customers across the UAE have taken up loan deferrals, interest relief and fee waivers to offset the economic impact of the Iran war. Hospitality, transport and tourism businesses were the biggest beneficiaries of the lifeline extended through banks in the UAE . As of May 1, a total of 60,559 individual customers, 4,335 small and medium enterprises and 485 companies took concessions and deferrals, the central bank said at the time. The relief package will remain in place until June, when it will be reviewed by the banking regulator to determine whether it needs to be extended, Mr Al Ghurair said on Wednesday. Data hosting The UAE Central Bank has also allowed Emirati lenders to host their data outside the country during the crisis due to Iran's indiscriminate attacks on civilian infrastructure in the region, Mr Al Ghurair said. Amazon’s data centres in the UAE and Bahrain were damaged in March after Iran fired waves of drones and missiles at its Arab neighbours, which raised concerns about data hosted at centres across the region. Under the current regulations, the central bank regulates the bank data hosting in the country, requiring all financial institutions to keep customer and transaction data within the UAE. A backup of all consumer data and transactions is also required, ideally with off-site storage within the UAE. “They [the central bank] gave us relief to store some of the data outside [the UAE],” Mr Al Ghurair said. It is a temporary relief through which banks can transfer data outside the UAE and bring it back in, and there is a weekly monitoring mechanism in place. “[So] in case of crisis, you have an alternative solution running," Mr Al Ghurair said. The data centre hit has “triggered” the central bank move, but the transfer of data hosting is not an easy or cheap process, he said. “It takes time. I mean, you need to have storage, you need to have a contract with a third party, you need to have a facility there [and] you need to have your server sitting there,” Mr Al Ghurair said. “It's not overnight, and if you want it overnight, it comes at a cost. But now, it's been allowed to explore hosting a lot of stuff outside.” Growth spurt Despite the Iran war entering its third month and the Strait of Hormuz remaining shut during the conflict, the UAE economy has proven its resilience, and may well achieve its prewar growth estimate of 5.6 per cent this year. A sharp burst of economic activity towards the latter half of the year could help the Arab world's second-largest economy to achieve that growth. However, even if it grows to revised estimates of more than 4 per cent, the UAE economy will still be growing faster than the US, as well as economies in the European bloc, Mr Al Ghurair said. Play 00:50 UAE can deal with 'severe shock' from Iran war, IMF says “We should be proud, as while the world is still slowly growing, we are growing a lot faster, even as we have adjusted for the crisis,” he said. “I am optimistic. By the end of the year, [hopefully], we will catch up,” he said. “You will see a lot of activities in the economy, which will prompt more growth, so our economy should be fine.” Inflation in the UAE, however, will still remain lower than the US and Europe despite an increase in prices of some commodities, including fuel, as the weights of components in the inflation basket have changed during the crisis, he added. Rent, according to Mr Al Ghurair, has the biggest weight in the basket, but is coming down, so even if prices increase elsewhere, the overall inflation figure of 2.5 per cent will still remain the same by the end of the year.