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The amount of personal loans issued by banks in the United Arab Emirates increased by 15.7 billion UAE dirhams ($4.27 billion) in June – up by 4.7 per cent – but loans granted to businesses dropped by 16.6 percent in the same period, Emarat Alyoum newspaper reported on Thursday.
Quoting central bank data, the newspaper said personal loans grew to 349 billion dirhams in June, from 333.3 billion in June of last year, while business loans retracted to 83 billion dirhams, from 96.8 billion a year earlier.
“This news is expected and has been going on for few months. Banks are tightening their liquidity and lending due to the negative business sentiment, so they prefer to give more personal loans as they (personal loans) are of lower risk and higher margins,” analyst Rakesh Pardasani, partner in RSM consultancy firm in the UAE told Zawya.
The UAE. like most Gulf Arab states has tightened spending to combat an economic slowdown that started in the Gulf Arab region in 2014, triggered by a sharp fall in oil prices.
“This will go on for a while, at least until the end of the year and will not change until we have better business sentiment,” Pardasani added. “Everything is going negative now.”
“We have the Qatar crisis, lack of liquidity, demand is low, VAT is coming, which is not very good news for businesses,” he said.
The UAE agreed last year to a decision taken by all six countries of the Gulf Cooperation Council (GCC) to introduce a new 5 percent Value Added Tax (VAT) by January next year. It also recently joined Saudi Arabia, Egypt and Bahrain in a move to cut diplomatic ties with Qatar in June.
Emarat Alyoum also reported an increase in the UAE’s central bank foreign reserves, stating that these grew by 35.6 billion dirhams to reach 336 billion until the end of June - up from 300.4 billion in June last year.
© Zawya 2017
