The Central Bank of the UAE (CBUAE) released its monetary and banking development report for August 2024, highlighting key trends in money supply, monetary base, and banking assets. The report shows a dynamic financial landscape with both declines and increases across various aggregates.
The money supply aggregate M1 recorded a slight decline of 0.1%, falling from AED 889.3 billion in July 2024 to AED 888.0 billion in August 2024. This reduction was attributed to a decrease of AED 0.9 billion in currency circulation outside banks and a drop of AED 0.4 billion in monetary deposits.
Conversely, the money supply aggregate M2 increased by 0.2%, rising from AED 2,205.9 billion in July to AED 2,211.1 billion in August. This growth was driven by a notable AED 6.5 billion increase in quasi-monetary deposits, which offset the decline in M1. The broader money supply aggregate M3 also grew by 0.8%, reaching AED 2,696.3 billion, up from AED 2,676.0 billion in July. This expansion was supported by the increase in M2 and a significant AED 15.1 billion rise in government deposits.
The monetary base experienced a 2.3% growth during August 2024, expanding from AED 718.1 billion in July to AED 734.9 billion. This increase was fueled by a 0.6% rise in currency issuance, a 6.2% increase in reserve accounts, and a 6.1% growth in monetary bills and Islamic certificates of deposit. However, a 10.2% reduction in banks and other financial corporations’ (OFCs) current accounts and overnight deposits at CBUAE slightly offset this growth.
Gross bank assets, including bankers’ acceptances, rose by 0.7%, reaching AED 4,378.0 billion in August compared to AED 4,348.6 billion in July. Similarly, gross credit saw an increase of 0.5%, climbing from AED 2,102.1 billion to AED 2,112.9 billion. This uptick was driven by a 0.5% growth in domestic credit and a 0.8% increase in foreign credit. Notably, domestic credit expansion was primarily due to a 0.8% rise in private sector credit, which outweighed reductions in credit to public sector government-related entities (0.3%) and non-banking financial institutions (3.0%). Credit to the government sector remained unchanged during the period.
Banks’ deposits experienced a modest increase of 0.2%, growing from AED 2,736.0 billion in July to AED 2,740.5 billion in August. Resident deposits rose by 0.8%, driven by increases in government sector deposits (2.6%), private sector deposits (1.2%), and deposits from non-banking financial institutions (4.2%). These gains offset a 5.9% decline in deposits from government-related entities. However, non-resident deposits saw a notable decrease of 6.4%.
The data underscores the UAE’s resilience in navigating fluctuating financial conditions, reflecting a balanced approach to credit expansion and deposit growth. These trends highlight the CBUAE’s efforts to maintain economic stability while adapting to changing market dynamics.