UAE Interest rates are expected to go up in the near term. 1 Year Eibor rate has reached 1.197 where it was 1.172 in the beginning of the Month.
Some of the factors contributing to the rise of Interest rates are
1. With low oil prices, Government and related entities are not making enough deposits in banks. Government deposits contribute nearly 25% of the bank deposits each year.
2. Low Economic growth across the region and globe is hampering the growth of deposits and cash inflows.
3. Many SME’s are facing cash flow problems due to rise in receivables which is making them to borrow short term in order to make payments. This is driving the demand for short term loans.
With Increase in demand for cash and decrease in deposits is creating liquidity constraints for banks which is driving the cost of borrowing in the short or medium term