The United Arab Emirates ranks 4th among 62 countries worldwide in terms of financial stability, according to the latest World Economic Forum Financial Development Report 2012 released today. The research is based on various pillars, the third of which is the stability of the financial system. The economy of Saudi Arabia ranks first, while Switzerland and Singapore rank 2nd and third, respectively.
The UAE’s economy ranks 4th in terms of financial stability with a score of 5.58 out of 7.
The severe negative impact of financial instability on economic growth emerged sharply in the recent financial crises. Such instability can lead to significant losses to investors, resulting in systematic banking and corporate crises, currency crises, and sovereign debt crises. The third pillar, financial stability, captures the risk of these three types of crises.
Placing 21st on this year’s index, Kuwait is the highest ranked country in the Middle East and North Africa region.
Coming in behind are Bahrain (25th) and the United Arab Emirates (26th), both of which declined one spot since last year. UAE took a hit because its banking system became less efficient (43rd), falling 10spots. The UAE experienced decline results in the IPO activity (48th), securitization (51st), and retail access (26th) subpillars.
Despite these weaknesses, the Gulf States benefit from strong factors, policies and institutions. The UAE benefit from efficient tax regime (1st), generally strong corporate governance mechanisms (16th) and highly stable banking system (4th).
