Revaluation to contain inflation
Shuaa Capital issued a report on inflation in the region saying the dollar reached new lows and imported inflation in the GCC region, especially in food prices, jumped to new highs.
“The need for a monetary response is more and more crucial at this time,” the report said.
Sahar Tabaja, associate researcher in macro economy at Shuaa Capital, told Emirates Business that food prices are increasing very rapidly in international markets.
She said: “We cited three main reasons for inflation in the region; shortage in property supplies, imported inflation and high liquidity. By revaluating currencies, Gulf central banks will be able to control the last two factors.”
Financial experts agreed that shortage in properties is the main driver of inflationary pressure in the region but they disagreed with the idea that appreciation of local currencies would have immediate impact on prices of basic commodities.
“Increases in rents of properties represent 40 per cent of total inflation in the UAE. Other factors are fuel prices and cost of transportation. So revaluation of the UAE dirham will have a limited impact on food prices because this will reduce original prices of imported commodities but it will not reduce the rents and other costs,” said Ziad Dabbas, financial consultant of the National Bank of Abu Dhabi.
Follow Emirates 24|7 on Google News.