Saudi Arabia, Bahrain, and the United Arab Emirates have announced a cut in their rates. The Central Bank UAE disclosed an interest and repo rate cut by 25 basis points on the issuance of certificates by deposits and for borrowing short term liquidity, respectively.
This cut in the rates across all the GCC countries is expected to reduce the borrowing cost, which will create a positive impact on the debt servicing burdens of the wholesale borrowers and corporates.
However, the retail borrowers might not benefit from this cut in the rates apart from the loans whose rates are linked directly to the inter-bank rates.
The UAE has constantly been facing slow growth in its credit, along with rising and effective exchange rates, which has hurt the growth prospects of the key sectors such as real estate, retail, and wholesale trade. The lower rates will majorly resolve both these concerns to a large extent.
These lower rates are also expected to bring down the borrowing costs of individuals as well as companies. Analysts have also stated this rate cut is not very likely to result in a big increase in credit growth towards the private sector as a result of the regional economies is slowing along with the global slowdown coming from the geopolitical tensions and trade war.