Consumer prices drop after VAT-led spike in January
UAE banks draw down Dh6.8 bn in CDs from Central Bank
UAE banks removed Dh6.8 billion from certificates of deposits held with the Central Bank in the first two months of the year, according to official data.
As a result of the draw-down, the level of certificates of deposits dropped to Dh128.3bn at the end of February from Dh132.4bn at the end of January. At the end of December, outstanding CDs stood at Dh135.1bn. At the same time, gross credit rose by Dh12bn in the January and February period, the Central Bank reported.
"Deposits declined Dh7bn in January and February largely due to outflows of government sector deposits. As a result, we saw banks tapping into their excess liquidity parked at the central bank leading to Dh6.8bn decline in central bank CDs held by banks," said Suha Urgan, a Dubai-based credit analyst with S&P Global Ratings.
“This pick-up [in credit] is in line with our overall expectations for 2018 as we project economic growth to recover gradually supported by increased oil prices and spending on investment projects."
Separately, inflation in the UAE fell in February to 4.5 per cent from 4.8 per cent in January, which was the highest since 2015 after the government introduced a 5 per cent VAT.
On a month-to-month basis, the rate of inflation slipped to 0.2 per cent in February after a 2.7 per cent gain in January. Food and beverages prices advanced 6.5 per cent year-on-year in February after increasing 7.2 per cent in January. Housing and utility prices, which account for the biggest part of the inflation basket, declined 0.6 per cent in February.