UAE money supply shrinks as consumers hold back

Banks in the UAE are lending less while consumers may also be spending less despite a summer sales offensive from retailers, according to new economic data.
Lending fell last month as banks remained cautious about extending their loan books at a time when bad loans from defaulting customers are increasing, central bank data show.

At the same time, a key measure of money supply in the UAE, which takes account of currency in circulation and monetary deposits, shrunk for the second month running in July, indicating a slowdown in consumer spending and a possible easing in inflationary pressure.

“Many people have overspent and you can only guess that there are debt-ridden consumers who are cutting back on their spending,” said Eckart Woertz, an economist at the Gulf Research Center. “This also shows a reluctance on the part of banks to lend,” he said.