Bank credit up 4.9% in 2022

«Central»: The strength of the economy absorbs the impact of raising interest rates on loan demand

The Central Bank raised the key interest rate over the past year 7 consecutive times. Archival

The Central Bank has confirmed that the strength of the UAE's economy is absorbing the negative impact of interest hikes on demand for bank loans.

The CBE said in a recent report that the credit trends survey for the fourth quarter of last year shows the continued growth in demand for loans for the household and corporate sectors, in addition to the continued desire of financial institutions to grant credit.

He noted that during the last quarter economic conditions were strong against the impact of interest rate hikes on loan demand.

Raising interest rates

The central bank raised the key interest rate last year, seven consecutive times between March and December 2022, until it reached 4.40% by the end of the year, in line with a similar hike by the US Federal Reserve due to the policy of pegging the dirham to the dollar.

Since the beginning of last year, the Federal Reserve has been pursuing a tight monetary policy aimed at curbing inflation and controlling price hikes, which are the highest in four decades.

Business Trust

The CBE said in its report that the composite index of business confidence recorded 119.4 points for the fourth quarter of last year, up from 109.8 points in the previous quarter of the same year, which indicates an improvement in expectations of work activities, pointing out that companies in all commercial, industrial and services sectors were characterized by their strength, in addition to the expansion of their activities. "The business outlook, according to the surveys, is largely optimistic, supported by a very positive business environment and high demand and sales," he said.

Bank Credit

"Bank credit rose over the past year by 4.9% year-on-year," the CBE said, noting that domestic credit growth, which accounts for 87.8% of total loans, was driven by lending to private companies followed by retail loans.

He pointed out that credit in retail loans has been directed specifically towards mortgage loans, personal loans and credit cards, and cross-border lending has been expanded by licensed banks in the UAE.