A record 15.6 billion UAE dirhams ($4.2 million) increase in cash landed the non-government deposit accounts of banks across the country over the last few months, according to the latest official data.
From April to June this year, savings held in private sector accounts ballooned to 1,091.8 billion, up by 1.4 percent compared with 1,076.2 billion during the previous quarter, and higher by six percent than in the same period last year, the UAE central bank revealed in a new report.
The growth in deposits has been largely driven by residents’ stronger attitudes to saving amid the coronavirus pandemic. With greater uncertainty, consumers have changed their spending habits and turned to saving money to secure their finances.
“Households became thriftier in their day-to-day expenses, therefore saving more as a precaution against rising uncertainties,” the central bank said.
Less spending, more saving
Consumer spending in the country has plummeted since the onset of the pandemic, with the luxury goods, beauty, personal care, apparel, footwear, eyewear and accessories seeing the most significant declines, according to Euromonitor data.
A recent survey commissioned by Kearney Middle East has recently found that 40 percent of people in the UAE have seen their cash reserves rise over the past few months.
“Consumers are likely to save… given the market circumstances, rather than engage in compulsive purchase behaviour,” Rabia Yasmeen, senior research analyst at Euromonitor International, told Zawya earlier.
Banks have seen a high influx of cash in public sector accounts as well, driven largely by government’s response to the health outbreak.
According to the central bank, government deposits rose by 33.9 billion UAE dirhams in the second quarter of the year, compared with the previous quarter.
Billions of US dollars in emergency relief funds have been funnelled to businesses to mitigate the economic impact of the pandemic. In March alone, the banking authority announced a package of measures, worth 100 billion UAE dirhams ($27.2 billion) to provide financial relief to retail and other business customers.
Overall, the central bank said the “financial soundness indicators” for the country remained healthy as of the second quarter, underpinned by the enhanced Targeted Economic Support Scheme (TESS).
The number of licensed commercial banks in the country also remain unchanged, although the second quarter saw some branch closures and further payroll reductions.
At the end of the second quarter, there were 611 bank branches operating in the UAE, compared with 640 in the first quarter. According to the central bank, the decline is due to the “digitisation of financial services.”
The number of bank staff also decreased by 415 to 35,423 employees.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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