Consumer loans in the UAE soared almost 47 per cent in the year to March as the second-largest Arab economy slashed interest rates in line with the United States Federal Reserve, central bank data showed on Sunday.
Consumer lending in the UAE has doubled in the past four years, during which time oil prices have risen almost six-fold, helping drive economies in the world's biggest oil-exporting region.
Loans to individuals in the world's fifth-largest oil exporter rose to Dh48.41 billion ($13.18bn) on March 31, compared with Dh32.95bn a year earlier, the UAE central bank said on its website.
Outstanding consumer loans rose 11.4 per cent in the first quarter, with an addition of Dh4.95bn of outstanding loans in the three-month period, the apex bank's data showed.
Like other Gulf states, the UAE pegs its dirham to the US dollar and has tracked seven rate cuts by the US Federal Reserve totalling 3.25 per cent since September 18 last year.
Banks have reduced some borrowing costs to reflect the monetary easing.
The peg has prevented the UAE from raising interest rates to rein in inflation that hit a 19-year high of 9.3 per cent in 2006 and probably accelerated to 11.4 per cent last year, according to the average forecast of economists in a Reuters poll this month.
Real interest rates in the UAE, which reflect the official rates charged by banks in the region minus inflation, are negative – spurring demand for credit.
Emirates NBD, the largest Gulf Arab lender by assets, last week said first-quarter profit jumped to 36.8 per cent as corporate and retail lending surged on low interest rates.
Total bank assets in the UAE grew 45 per cent to Dh1.34 trillion in the year to March, the central bank said.
Bank deposits were Dh773.59bn in March, up 7.4 per cent from the end of December. (Reuters)