UAE inflation hits 16-month high

UAE inflation hits 16-month high

As inflation rates reach a record high, some say headline inflation remains benign. Kipp looks at recent developments in the inflation arena

November 1, 2010 3:42 by Eva Fernandes

UAE’s inflation hit a 16-month high this September, reaching 1.2 percent after staying at 0.9 percent for four consecutive months. The National Bureau of Statistics said the rise was mainly caused by an increase in the cost of food and transport.

Inflation, which measures the rate of change in the level of prices for services and goods, has been reflective of the UAE’s economic developments: last year, UAE’s inflation dropped to a low of 1.65 percent from a record high of 12.3 percent in 2008. The current rise in inflation is a result in the increase in food costs (which increased by 2.7 percent) and transport (which increased by 1.6 percent).

Last month, Reuters reported Abu Dhabi’s inflation hit a 21-month high reaching 3.8 percent (annual), jumping up 1 percent on the month —some say it is Dubai’s economy that is hold back the inflation rate of the UAE. CPI Indicator editor Tim Fox blogs: ‘ Dubai’s inflation rate … continues to lag the national average, as one would expect, given the extent of financial distressed caused by the local property market’s correction. The national average is clearly boosted by items rising in price at over 2 per cent outside the large emirates of Abu Dhabi and Dubai.’

Yet experts say that the increase in inflation rates is relatively undisruptive. John Sfakianakis, the chief economist at Riyadh-based Banque Saudi Fransi told Reuters, ‘”Headline inflation will begin to rise everywhere and see additional inflationary pressures, but will remain extremely benign on an annual basis.”

Though the rise may seem negligible in the larger scheme of things, Khaleej Times reports of how the high cost of living is affecting residents of the UAE. For instance, Priya Sreeram, a 40-year-old who has lived in Sharjah for the past seven years complains, ‘Now, everything is increasing. The cost of living is so high that most expatriates have a hard time making both ends meet (…) without salary increases, how can expatriates survive?’