DUBAI: The International Monetary Fund (IMF) has said that the United Arab Emirates and other Gulf economies could trouble if the Euro zone debt crisis spreads to peripheral states. The report, dated April 27 and released this month, says that the risks are serious for Gulf economies, singling out the UAE specifically. The report was prepared ahead of consultations with the UAE. “While vulnerabilities have decreased since 2008, the results of this analysis nonetheless suggest that the (UAE) authorities need to remain vigilant to global shocks and continue to strengthen buffers,” the report read. The banking system of the UAE, the world”s No. 3 oil exporter, is only moderately exposed to Europe, the IMF noted. Foreign liabilities are about 19 percent of its total liabilities, while Europeans hold about 20 percent of UAE banking system assets. “While the estimated level of financial spillovers to Dubai is once again increasing, it is still below 2008-09 levels. European countries, Greece in particular, have been key contributors,” the report continued. Despite the fears, the IMF did affirm that it currently was not seeing any indication that the country's banking system was facing trouble at the current moment. It also added that the possibility of bank losses seeing simultaneous large losses was limited. However, the report added: “The results of this analysis show that risk is concentrated in a few banks; these banks will need stronger supervision and closer monitoring of their cross-border and their domestic interbank exposures.” Dubai itself is still recovering from the 2009-2010 corporate debt crisis that hit the city. “While the funding situation of local banks has stabilised, a foreign funding shock could generate some liquidity tightening in the banking sector,” the report said. It predicted the asset quality of UAE banks would deteriorate this year and the number of bad loans would rise, although the banking sector would be able to handle a significant increase. Seven out of 26 listed companies in the UAE's real estate sector, with total liabilities of $12 billion, have operating losses or do not have sufficient operating income to service their debt, it said.