Consumer loans soar 47% in UAE on rate cuts

Dubai: 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 US, central bank data showed on Sunday.

Consumer lending in the UAE has doubled in the last 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 ($13.18 billion) on March 31, compared with Dh32.95 billion a year earlier, the central bank said.

Outstanding consumer loans rose 11.4 per cent in the first quarter, with an addition of Dh4.95 billion of outstanding loans in the three-month period, the data showed.

The UAE has tracked seven rate cuts by the US Federal Reserve totalling 3.25 per cent since September 18, 2007. 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 minus inflation - are negative, spurring demand for credit.