UAE inflation to rise... as economy booms

Cost of living in the UAE is expected to continue rising in the second half of this year and could reach over 4 per cent year-on-year by the end of 2014 as economy expands and inflow of expatriates continues, pushing up rents and property prices, reports said.

Dubai-based Emirates NBD bank said in a recent note that it expects inflation in the UAE to continue to rise during the course of this year as higher housing costs feed through to the official index and the firms enjoy increased pricing power and are able to pass on their higher productions to the consumers.

It said UAE firms have apparently not passed on full extent of higher production costs to the consumers as prices rose marginally in February and March 2014.

Headline inflation in the UAE remained relatively low at 1.9 per cent in March, up from 1.5 per cent in December 2013, led by rise in rents and property prices.

According to industry report, rents in all the emirates have been rising since last year.

“We retain our average 2014 inflation forecast of 3 per cent – up from 1.1 per cent in 2013, although we note that the year-on-year rate is likely to reach 4-4.5 per cent by December 2014,” Emirates NBD analysts said in the note.

Kuwait-based Global Investment House too said in a recent report that it expects inflation to move up in 2014 as housing prices continue to increase driven by growing domestic demand and rising non-oil commodity prices.

The Dubai Statistics Centre said last week that prices were up 3 per cent in April from a year earlier in the emirate, led by a rise in the cost of housing, which make up the biggest component on the consumer price index.

Last month, gas and housing prices in Dubai climbed 15 and 5.3 per cent, respectively, raising the housing sub-index to 4.9 per cent.

Reports claim that the emirate’s economy is projected to grow at the fastest rate since 2007.

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