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UAE sees first annual deflation in 20 months

Consumer prices in the UAE dipped by 0.1 percent on an annual basis in October, their first decline in 20 months, and rose 0.4 percent from the previous month helped by a jump in food costs, data from the National Bureau of Statistics showed on Monday.

November 21, 2011 2:26 by

Analysts have expected prices in the world’s No. 4 oil exporter to pick up gradually this year as the Gulf country recovers from Dubai debt woes, although the government price controls have slowed the rise.

The second largest Arab economy is seen expanding by 3.8 percent this year and next after a 1.4 percent growth in 2010.

Analysts polled by Reuters in September expected average inflation of 2.0 percent in 2011 and 3.0 percent in 2012  after 0.9 percent last year, which was the lowest annual level since the Gulf war started 1990.

UAE Economy Minister Sultan bin Saeed al-Mansouri said in November that Europe’s worsening debt crisis and weakness in the US economy may slow growth in the UAE to around 3 percent next year.

Mansouri also said he expected inflation of 1.8-2.0 percent on average in 2012, adding the UAE will continue to implement price controls on certain commodities

UAE Central Bank Governor Sultan Nasser al-Suweidi said in June inflation was likely to be lower than 3 percent as the real estate sector continues to be under pressure.

“The October numbers offer little evidence of a pick-up in price pressures, and we still think that excess capacity will keep inflation low for the foreseeable future,” says Liz Martins, Senior MENA Economist, HSBC, Dubai. “Even where prices are higher — e.g. in input costs –companies tend not to be passing these onto consumers.” (Reporting by Martin Dokoupil; Editing by David French)

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