Inflation in UAE stands at 12%

By Babu Das Augustine, Banking Editor
Published: June 15, 2008, 00:06


Dubai: Inflation in the UAE is estimated at 12 per cent while the rate in Abu Dhabi increased from 10.7 per cent in December last year to 11.5 per cent at the end of March, Abu Dhabi's Department of Planning and Economy (DPE) said in a report on Saturday.

Earlier this year, the International Monetary Fund had estimated inflation for 2008 at nine per cent.

The report attributes the high figures to the increase in consumer prices, costly rents and fuel, and soaring costs of goods and services.

While rising liquidity, low interest rates and easy bank loans have contributed, the report observes that the declining value of the dollar, to which the dirham is pegged, has contributed to the rising cost of imports.

According to the report, last year the country witnessed increases in housing rents, the cost of production and prices of goods and services.

DPE estimates that during the first three months of this year, inflation surged past 11.5 per cent while the index for rents, electricity and water was up 18.21 per cent from a year earlier.

The index for food, beverages and tobacco gained 19.78 per cent.

While DPE identifies rent as the single most important component, it acknowledges other factors such as the declining value of the dollar and the surging liquidity from oil surpluses as major contributors to rising prices.

Upward pressure

The high liquidity has applied upward pressure on the real exchange rates. In the absence of monetary policy tools and flexible exchange rates, the pressure on the dirham is reflected in high prices. Because of the peg, the UAE central bank usually shadows US interest rate moves, hampering the fight against inflation.

"The interest rates prevailing in the market merely demonstrate a response to external conditions [US interest rates], but do not do not reflect the real internal situation," DPE said.

Have your say
How has the current cost of living affected you? Are there any significant changes in your lifestyle? Tell us at letter2editor@gulfnews.com or fill in the form bellow to send your comments.


--------------------------------------------------------------
Your comments

It has become very difficult to survive here in UAE because of huge inflation ,increase in consumer prices, costly rents and fuel whatever we are earning that much we are spending ,no saving nothing
Mohammed
Sharjah,UAE
Posted: June 15, 2008, 09:29

NO COMMENTS...i DO NOT THINK IT STANDS ON 12%
AMR
Dubai,UAE
Posted: June 15, 2008, 08:40

The basic necessities remain there. You can not cut costs especially when you are living with kids and want to offer them the best facilities. The effect is on saving which are dented to a large extent. The saving which were estimated to be around AED 7000-8000 pm having shrunk to AED 3000-4000 pm. hence you can see the effects. It takes time to bring out a change in life style especially when you are used to a certain standardised life style and formed a social network.
Pradeep
dubai,UAE
Posted: June 15, 2008, 08:32

I can't save out of my pay cheque any more. In addition planning anything that require financial commitment is really difficult nowadays.
Wissam
Abu Dhabi,UAE
Posted: June 15, 2008, 07:36

The main factor which is really effecting people is ever rising rentals. Govt should take measures in this regard. Most of the people have to spend more than 50% of their income as rental.
Imran
Sharjah,UEA
Posted: June 15, 2008, 01:22