Credit growth in the United Arab Emirates would slow to no more than 10 per cent in 2009, the central bank governor said on Monday, as banks adjust to a financial crisis that has slammed the brakes on economic growth.

Credit growth in the UAE, the second-largest Arab economy, has about doubled in the last four years during an oil-fuelled boom in the Gulf Arab region.

Consumer loans surged 46 per cent in the year to June while total credit to the private sector soared 55 per cent.

'The UAE's credit growth will be between 5 and 10 percent, no more, in 2009,' Sultan Nasser al-Suweidi told reporters after a news conference in the UAE capital.

New lending has lost steam in the last five months as banks become more prudent because they face higher borrowing costs and the prospect that some borrowers may default on real estate loans during a housing market correction in Dubai.

'The banking sector will have to make adjustments and take necessary provisions,' Suweidi said. 'They have to make a review of bank loans and advances, especially real estate loans, and businesses exposed to real estate.'

After soaring about 50 per cent since 2004, real economic growth in the UAE would slow to 'low single digit' levels next year, Suweidi said last week.

In this slowing economic environment, banks should be able to meet credit demand since deposit growth remains at 'double-digit' levels, Suweidi said on Monday.

Banking profits this year will be less than last year,' he said. 'They will have to review, rethink and recalculate their positions and then decide on the next move. It's an awakening moment from the shock.'

House prices in Dubai are likely to fall almost 28 percent from a peak earlier this year, a Reuters survey showed this month.

Real estate price declines were 'due to psychological reasons and non-availability of bank loans,' Suweidi said, adding that rents in the Gulf state were due to 'come down'.

Banks are already becoming more cautious when extending personal loans and have tightened credit criteria since the global financial crisis intensified in October.

The UAE's biggest bank, Emirates NBD, has stopped lending altogether to foreigners who work for top Dubai property firms on fears a slowdown would jeopardise their jobs and income.

Emirates NBD was formed in 2007 from the state-sanctioned merger of Emirates Bank International and National Bank of Dubai.

Suweidi said he would like to see more consolidation in the UAE banking sector, where more than 50 banks now operate.

'It depends on how banks perform. Performance will have an impact on the issue of consolidation,' he added.-Reuters