The UAE is one of the fastest growing economies in the world with an average real growth rate of 9.7 per cent, but this growth has come at an increased cost of living. High inflation is becoming an unwelcome offshoot and consumers are feeling the pinch when it comes to buying everyday items.
Contributing factors to inflation include items purchased from non-dollar linked economies, such as cars and food. Also high rents account for more than half of the UAE inflation, with some supermarkets’ rent doubling in the past two years. This means at street level, more people are complaining of prices going up and wages not increasing accordingly.
Economic consultant Ridha Moslem said high inflation was also a major challenge to the country’s monetary and economic policies – and affected the price of a basket of groceries.
He said prompt local or federal efforts led to a drop in the purchasing power of the dirham and consequently a drop in living standards. Also UAE products’ competitiveness in world markets had retreated. Moslem said: “These attempts recognise the reasons behind price hikes in local markets in order to set practical mechanisms to control the rises, maintain a decent life level and achieve community security and peace.”
Moslem said inflation could reach as high as 14 per cent in the coming months, a rise triggered by global prices, fuel costs, increases in salaries and rental hikes.
Meanwhile, a leading retailer has said that the cost of food should be linked to the global price of commodities to free up competition among traders, it was reported. The UAE federal government sets the price of specific basic goods such as cooking oil, milk and bread.
But market forces and the battle for more customers should be the deciding factor on the cost of “basics”, said Faisal Al Arshi, deputy general manager of Abu Dhabi Co-operative Society.
“The ‘maximum price ceiling’ differs from one commodity to another, and it is done once commodities enter the customs facilities in ports and airports,” he said.
“There purchase bills are checked and the proper profit margin is set, while other commodities are left to the policy of supply and demand.
“If this is done, nobody can raise prices. If this wasn’t the case, everybody would try to bring the price down to attract customers.”
He said by tying the price to commodities, retailers could alter their profit margins as they wished in their commercial bid to attract more customers.
However, a straw poll carried out by Emirates Business suggested the price of foods – and many other everyday costs – was of low importance. According to the survey, a significant number of people failed to correctly answer questions such as “how much is a litre of milk?” and “how much is a litre of petrol?”.
Ramon Hoeven, 37, account manager, the Netherlands
I find the prices here at least 30 per cent less than in Holland. If you ship in things then it is always going to be expensive. I don’t know how much certain items cost – I just put them in the trolley and it is cheaper than what we normally spend back home.
Radot Spasova, department manager at Centre for Musical Arts, from Bulgaria
We have a high standard of living here and it’s easier to buy things than in Bulgaria. Food is quite expensive but, like clothing, it depends what you want to buy. I don’t know the cost of electricity and water
Jad Caceres, 37, a chef from the Philippines
I have been here for 17 years and in my job I have noticed a big increase in the price of food. Electricity is also rising, but I am not sure how much it is in units. But sliced bread has doubled in price in the past six months.
Mike O’Hanlon, 42, a civil engineer from the United Kingdom
We are spending Dh150 a week on our shopping bill. But mostly we find the rent expensive as we have had to move twice and
the increases have been outrageous.
Ashley Grant, 37, a nursery school administrator from South Africa
The biggest impact of inflation is schooling and rent. We have seen a big increase in the numbers of toddlers being enrolled because both parents have to work. We now have a waiting list of 20 to 30 for babies aged nought to two.
Data shows consumers unaware of UAE prices