UAE inflation 11.1% last year - official

CLIMBING COSTS: Inflation in the UAE hit 11.1 percent in 2007, driven by rental and housing costs, the Economy Ministry has said. (Getty Images)

Inflation in the UAE accelerated to 11.1 percent last year, up from 9.3 percent in 2006, the Ministry of Economy said on Tuesday.

The ministry said in a statement inflation was driven by rental and housing costs, which jumped 17.5 percent, followed by goods and services, which rose 16.8 percent.

Increases in the average prices of other expenditure items on the consumer price index (CPI) ranged from 3 percent to 8 percent, it said.

Rents and housing has a 36 percent weighting in the CPI, with comprising 6.5 percent, or 58.6 percent, of the total 11.1 percent inflation figure, the ministry said.

Goods and services made up 1.4 percent of inflation, or 12.8 percent of the total contribution. The other expenditure groups comprised less than 1 percent to total inflation, it said.

The ministry also said it was working on a new CPI system, under which inflation figures would be published monthly. The new system would be available by early 2009, it said.

The announcement ends months of speculation over just how quickly the cost of living is rising in the Gulf second-largest economy.

Abu Dhabi Chamber of Commerce and Industry said last month UAE inflation jumped to 14 percent in 2007, citing government estimates.

However, most analysts' estimates had put 2007 inflation at between 10.9 percent and 11.4 percent.

Analysts have predicted inflation could touch 11.8 percent in 2008.

UAE only publishes official inflation figures annually, unlike other Gulf states, which have been reporting inflation rocketing to record highs month-on-month.

Oman on Monday said inflation had accelerated to a record 12.4 percent in April on soaring food prices and rents. Inflation now stands above 10 percent in five of the six Gulf states.

The publication of the UAE's official inflation data will likely renew pressure on the Gulf state to ditch its currency peg to the ailing US dollar, which has been blamed for increasing the cost of imports and restricting the central bank's ability to fight inflation.

The UAE's dollar peg forces the central bank to track US monetary policy to maintain the relative attractiveness of the dirham.

The US Federal Reserve has been slashing interest rates since September to stave off recession at a time when the UAE and other Gulf states should be hiking rates to rein in inflation.

Of the six Gulf states, only Kuwait does not peg its currency to the dollar.

IN PICS: Costs, taxes, charges
Arabian Business takes a look at some of the major extra costs that residents in the UAE are facing.

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