Consumer lending continues to grow in the United Arab Emirates but at a weaker pace than initially anticipated. The first quarter of 2022 began well, with the closing ceremony of Expo 2020 in March 2022 stimulating travel and a general increase in consumer confidence, leading to vastly improved consumer expenditure.
After several years of deflation, the United Arab Emirates is registering rising inflation in 2022, although the rate remains one of the lowest in the world, with the Central Bank projecting a dip in 2023. As the Dirham is pegged to the US dollar, the Central Bank of the United Arab Emirates follows US Federal Reserve policy and it has increased its benchmark borrowing rate to mirror it.
After years of historically low rates in the United Arab Emirates, mortgage rates are rising in 2022, following monetary policy set by the US Federal Reserve. This is expected to impact first-time buyers the most as it will be more difficult for them to obtain financing.
Another major pocket of growth is the fintech sector, with new Buy Now, Pay Later (BNPL) platforms entering the fray and appealing to younger consumers. The payment model allows consumers to pay smaller, interest-free instalments in the months following the purchase, rather than paying the full amount at the point of checkout.
Momentum of consumer lending is very much impacted by the economic environment, and while the United Arab Emirates is seeing recovery and economic expansion, it remains to be seen how much impact geopolitical tension and financial market turbulence have on growth. Certainly, continuous increases in interest rates will negatively impact consumers’ willingness to borrow.
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Aggregate of Consumer Credit and Mortgages/Housing. Gross Lending: The total value of loans advanced by institutions in a given year; data refers to single year only. Outstanding Balance: The collective amount owed by borrowers at the end of a given year; data refers to the cumulative impact of debt.See All of Our Definitions
This report originates from Passport, our Consumer Lending research and analysis database.
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