The Central Bank of the UAE reported increases across key monetary aggregates in December 2024.
Money supply aggregate M1 rose by 2.3%, from Dh924.8 billion at the end of November to Dh946.4 billion at the end of December. This increase resulted from a Dh1.1 billion growth in currency in circulation outside banks and a Dh20.6 billion rise in monetary deposits.
Aggregate M2 increased by 1.7%, moving from Dh2.27 trillion to Dh2.31 trillion over the same period. This growth was due to the elevated M1 and a Dh17.0 billion increase in quasi-monetary deposits.
Money supply aggregate M3 saw a 0.4% uptick, from Dh2.76 trillion to Dh2.77 trillion, primarily driven by the growth in M2, which offset a Dh27.1 billion decrease in government deposits.
The monetary base expanded by 4.4%, from Dh748.0 billion to Dh780.6 billion. This expansion was driven by increases of 0.1% in currency issued, 0.6% in reserve accounts, 23.7% in banks and other financial corporations’ current accounts and overnight deposits at the CBUAE, and 4.1% in monetary bills and Islamic certificates of deposit.
Gross banks’ assets, including bankers’ acceptances, increased by 2.4%, from Dh4.45.4 trillion to Dh4.56 trillion. Gross credit grew by 0.8%, from Dh2.16 trillion to Dh2.18 trillion, driven by an 8.3% rise in foreign credit, which overshadowed a 0.4% decrease in domestic credit. The decline in domestic credit was due to reductions in credit to the public sector (government-related entities) by 2.5%, the private sector by 0.2%, and non-banking financial institutions by 2.5%, while credit to the government sector increased by 1.6%.
Bank deposits rose by 1.5%, from Dh2.80 trillion to Dh2.84 trillion, attributed to a 0.5% increase in resident deposits and a 13.9% surge in non-resident deposits. Resident deposits grew due to increases in government-related entities’ deposits by 4.2%, private sector deposits by 0.9%, and non-banking financial institutions’ deposits by 16.5%, despite a 5.2% decrease in government sector deposits.
In December 2024, the CBUAE reduced its base rate on the overnight deposit facility by 25 basis points to 4.40%, following the US Federal Reserve’s rate cut. This move aligns the UAE’s monetary policy with the Fed’s actions, as the dirham is pegged to the US dollar.
