The largest rise in the UAE’s consumer price index (CPI) last year was in the transportation component
On Wednesday, the Central Bank of the United Arab Emirates (CBUAE) announced that it would raise its base rate by 50 basis points to 2.25%.
This came into effect in sync with the decision of the Federal Reserve of the United States of America – the UAE dirham is pegged to the US dollar at the fixed exchange rate of 3.67 – as part of the attempt of the oil-dependent economy to avoid inflationary pressures.
Data from the UAE National Bureau of Statistics shows that annual inflation rose to 2.58% in November 2021 from 1.86% the previous month. It was the fourth consecutive month of rising inflation, and the highest since September 2018. Inflationary pressures were felt in the unprecedented rise in transport costs – a liter of petrol and diesel costs 3 Dh.66 (Super 98) and Dh4.08, from Friday – food and beverages, restaurants and hotels, housing and utilities and miscellaneous goods and services.
There has been a 20% increase in fuel prices in the past two months, as motorists expect double-digit increases in the coming months following Russia’s military aggression against Ukraine which started on February 24 and as a result the global economy went into a panic.
The largest rise in the UAE’s consumer price index (CPI) last year was in the transport component, which rose to 18% year-on-year in December and recorded an average rise of 9% compared to 2021. Soaring fuel prices and vehicle costs have risen sharply over the past year.
In the United Arab Emirates, the main components of the CPI – on the national index which has a base of 100 from 2014 – are housing (34.1% of the total weight); food and soft drinks (14.3%) and transportation (14.6%). Similarly, education represents 7.7%; miscellaneous goods and services (6.3%); furniture and household items (5.6%); communication (5.4%); restaurants and hotels (4%); recreation and culture (3.2 percent); textiles; clothing and footwear (3.2%); medical care (1.4 percent) and beverages and tobacco (0.3 percent).
In the United Arab Emirates, the CPI measures changes in the prices paid by consumers for a basket of goods and services.
Real | Previous | Upper | The lowest | Appointment | Unity | Frequency | |
108.62 | 108.60 | 112.29 | 89.17 | 2008 – 2021 | points | Monthly | 2014=100, Not seasonally adjusted (NSA) |
Inflation rate in the UAE
2017: 1.97% (0.35% increase over 2016)
2018: 3.07%, (1.1% increase over 2017)
2019: -1.93%, (5% decrease compared to 2018)
2020: -2.08% (down 15% compared to 2019)
The average annual inflation rate in the United Arab Emirates between 2008 and 2022 was 2.2%, according to available statistical data. Overall, the gross increase in the price of a product is 28.97% between 2008 and 2020. Thus, a product that would cost 100 Dh in 2008 could be purchased at the beginning of 2021 for 128.97 Dh.
Fuel prices in the UAE: a sharp rise
May 2017 | May 2022 | To go up | |
Essence | 1.96 Dh/litre (Super 98) | 3.66 Dh/litre (Super 98) | 86.73% |
Diesel | 1.90 Dh/litre | 4.08 MAD/litre | 114.74% |
UAE milk prices head north
May 2017 | May 2022 | To go up |
10 Dh (2 liters) | 15 Dhs (2 liters) | 50% |
Dubai rents soar on Covid-19 recovery
2015-2020: 40% drop due to raging contagion
2021: up to 25% increase
However, tenants would have to pay between 5% and 20% more on their annual rental leases according to the standards of the Real Estate Regulatory Agency (RERA) of the Dubai Land Department.
Can the UAE avoid inflationary challenges following a disruption in the global economy due to the conflict in Ukraine? Experts believe the country’s fundamentals are resilient and can absorb the shock unlike many developed economies.
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