UAE banks record credit growth despite interest rate hike

UAE banks record credit growth despite interest rate hike

UAE - Credit growth in the UAE’s banking sector, a key indicator of overall economic growth, surged to almost Dh2.0 trillion in the first quarter despite rising interest rates, signifying the resilient trend in the business sector. Gross credit showed a 0.9 per cent quarter-on-quarter (q-o-q) increase, amounting to Dh1.895.8 trillion, while customer deposits rose by 3.8 per cent q-o-q and 14.9 per cent y-o-y, reaching Dh 2,306.0 billion. Total assets of banks operating in the country increased by 2.6 per cent q-o-q, reaching Dh3.7647 trillion by the end of the first quarter of 2023, the Central Bank of the UAE (CBUAE) said in a report. When credit grows, consumers can borrow and spend more, and enterprises can borrow and invest more. A rise of consumption and investments creates jobs and leads to a growth of both income and profit. Corporate credit shocks influence GDP growth mainly through investment, while consumer credit shocks are associated with private consumption. Interest rate in the UAE averaged 1.49 per cent from 2007 until 2023, reaching an all time high of 5.15 per cent in May 2023 and a record low of 0.15 per cent in July 2021. The CBUAE report provides insights into