UAE consumer loans jump 40%

Dubai: Consumer loans in the UAE surged almost 40 per cent in 2007 as the second-largest Arab economy struggles to contain inflation and resist calls for it to drop its dollar peg or revalue its currency.

Loans to individuals in the world's fifth-largest oil exporter rose to Dh43.46 billion ($11.84 billion) on December 31, compared with Dh31.26 billion a year earlier, the UAE central bank said on its website on Monday.

Four-year figures

Consumer lending has almost doubled over the last four years, during which time oil prices have also more than tripled, helping to drive the UAE economy and borrowing. Total bank assets grew 42.3 per cent to Dh1.23 trillion in the year to December. 31, the central bank said.

Like four other Gulf oil producers, the UAE pegs its dirham to the dollar, forcing it to track US monetary policy at a time when the US Federal Reserve is cutting interest rates to ward off recession. Gulf economies, by contrast, are expanding, fuelling inflation.

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.

Inflation probably accelerated to 10.1 per cent last year, thought it might ease to 8.9 per cent this year, a Reuters poll of economists showed in December.