CBUAE indicates increase in demand for commercial loans

It is expected that the demand for commercial loans will increase further across all economic sectors in the country over the next three months, particularly in the retail and wholesale trade, real estate development, construction, and manufacturing sectors.

The Credit Sentiment Survey for the first quarter of this year, released, indicated a significant increase in personal credit demand and higher willingness of banks to offer personal loans.

The Central Bank noted that the improvement in household credit sentiment in recent quarters points to a strong contribution of consumer spending to economic growth, highlighting that corporate lending also showed positive credit dynamics.

The Central Bank pointed to a strong increase in demand for business loans in the first quarter of this year, with a noticeable increase in the uptake of credit and demand across the UAE. Demand was strongest in Dubai, and it is expected that demand for commercial loans will remain strong over the next three months.

According to survey results, demand growth was strongest for large firms, with solid growth from small and medium-sized enterprises (SMEs) as well. By country of residence, demand growth was strongest from expats and locals, while growth from non-residents was moderate in comparison.

Looking forward, survey results suggest solid aggregate loan demand, driven by strong demand from large firms, followed by SMEs and government-related entities (GREs).

Credit demand was robust across all industry classifications, with March quarter results above their long-run average across the board. Growth was highest in the retail and wholesale trade sector, followed by construction, property development and manufacturing.

Business loan demand is expected to increase further across all economic sectors over the next three months, primarily in the retail and wholesale trade, property development, construction, and manufacturing sectors.

Survey respondents cited improved economic conditions, working capital needs, and investment as key drivers for loan demand. By contrast, interest rates negatively influenced demand.

The Credit Sentiment Survey was launched in 2014 as part of the CBUAE’s efforts to gauge both supply and demand-side factors influencing the local credit market, and to further understand the linkages between credit sentiment and the broader UAE economy.