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From fuel to food to rent: how inflation has impacted rising prices in the UAE – News

The largest rise in the UAE’s consumer price index (CPI) last year was in the transportation component

Published: Sat, May 7, 2022, 12:05 PM

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.