Lending dropped in May as credit growth in the UAE economy trails Qatar and Saudi Arabia.
Credit growth trails Saudi, Qatari advance
Lending slowed in May, with UAE credit growth lagging Qatar and Saudi Arabia, new data show.
Loans and advances fell by 0.5 per cent to Dh1.049 trillion (US$287 billion), down from Dh1.054tn the month before, according to the data.
Credit growth has continued to be sluggish this year as many lenders remain preoccupied with provisioning to safeguard against non-performing loans.
"We would like to see private-sector loan growth much stronger to support broader recovery in the economy," said Khatija Haque, a senior economist at Emirates NBD.
Loans and advances rose 2.7 per cent in May compared with the same month last year.
In contrast, lending has picked up more robustly in Qatar and Saudi Arabia, buoyed by more positive economic outlooks.
In Saudi Arabia, credit grew 7.7 per cent in May from the same period last year, data show. In Qatar, credit rose 15 per cent in May over the same month last year.
A multibillion-dollar package of spending increases unveiled by the Saudi government this year has helped to revive banks' confidence in lending to businesses.
Similarly, a rise in infrastructure spending as Qatar prepares to host the 2022 Fifa World Cup has encouraged bank lending.
UAE banking deposits dropped to Dh1.123tn in May, down 0.4 per cent from the month before.
M2 money supply, an important indicator of future inflation, decreased by 1.1 per cent to Dh841.1bn in May from the previous month.