Rising credit demand in UAE signals bright outlook

Respondents expect the demand for business loans to increase, and credit standards to continue to remain largely unchanged in the current quarter.

Demand for business credit and personal loans in the UAE increased marginally in the July-September quarter, and a moderate increase is expected in the current quarter, reflecting steadily improving economic outlook, a Central Bank survey showed on Sunday.
Results from the September quarter "Credit Sentiment Survey," which collects information from senior credit officers from all banks and financial institutions, were consistent with the recovery registered since the beginning of the year, the Central Bank said.
According to respondents, demand for business credit has increased moderately in the third quarter. While 41.5 per cent of respondents reported no change, 35.5 per cent reported an increase in demand, and 22.9 per cent reported a decrease in demand.
For the fourth quarter, survey results suggested a marginal credit growth for both personal and business loans and expectation for a moderate increase. Respondents also expect the demand for business loans to increase, and credit standards to continue to remain largely unchanged in the current quarter.
"The most important factors in determining credit standards are economic outlook, and industry- or firm-specific conditions," Central Bank survey report said.
Echoing results for business lending, demand for personal loans slightly increased in the third quarter. The marginal increase in personal loan demand was mainly attributable to the strengthening in demand in Dubai and Northern Emirates. The demand for loans for Abu Dhabi decreased marginally for the second quarter in a row.
When asked about which factors contributed to the change in demand for loans, the survey revealed that change in income, and financial markets outlook were the most important.
Results also signalled a modest increase in demand for credit card, and personal loan. However, there was a decrease in demand for car loan, non-housing investment, and housing - investment. With respect to expectations for the December quarter, survey respondents expect demand for loans to grow in all categories, while non-housing investment remained unchanged.
Consistent with previous quarters, more than 80 per cent of survey results reported that the credit standard to be unchanged across all the categories. In terms of outlook, the credit standards in aggregate were expected to slightly tighten, the Central Bank said.
By emirate, survey respondents expected an increase in demand for loans across the board, most prominently in Dubai. By market segment, a modest increase in demand for loans was found across the board with the exception of nonresident.
Growth in the UAE non-oil private sector economy climbed to the fastest pace seen since February 2015, bolstered by sharp expansions in new orders and output, Emirates NBD's Purchasing Manager's Index survey showed.
"The August PMI survey shows a strong expansion in the non-oil private sector, underpinned by sharply higher output, new orders and inventories. Firms have indicated that new projects and competitive pricing are supporting demand and activity in the non-oil sector," Emirates NBD said.
 - issacjohn@khaleejtimes.com