Gulf Arabs facing inflation problems

Gulf countries planning a currency union are suffering from higher inflation and need more flexible monetary policy which is not tied to U.S. interest rates, the head of the Arab Monetary Fund said on Sunday.

Inflation is a region-wide problem as capital is flying into the Gulf economy which enjoys strong growth thanks to high oil prices.

"Everybody should admit that we are suffering from the inflation phenomenon and that is very bad for the economy because it makes the cost of living, production, high, and accordingly the region could lose quite a deal of competitiveness," director general of the AMF, Jassem Al-Mannai, told Reuters in an interview.

"Monetary policy should be more effective, meaning that monetary policy should have more manoeuvrability where you are not bound by the interest rates of an anchor currency."

Al-Mannai also said that the Gulf Cooperation Council's 2010 deadline for a single currency might be delayed by a few years after Oman said it will not meet the timeframe.

In the UAE, inflation rose by a third last year, driven up buy the rising cost of accommodation, according to official statistics released last week.

The country's inflation rate stood at 9.3% for 2006, up from 6.2% the year before, but down on previous official estimates of 10%.

If inflation levels do not drop there is the danger that soaring cost of living will deter workers from living in the Gulf region, which could damage the local economies.

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Inflation in Region
Posted by Eijkenboom, Dubai on Monday 25 June 2007 at 08:00 UAE time


It is all so correct. Already my advice to companies is better to move or set up new business in other prosperous countries/cities in GCC like in Doha or Manama. You're still right in the middle of all business or only one hour away from Dubai/AbuDhabi by air, yet prices of properties and cost of living are much more favourable, leaving you more to invest and to grow. Financial greed will kill Dubai very soon.

Dubai Roads System
Posted by Ray Hunter, Dubai, UAE on Monday 25 June 2007 at 07:00 UAE time


With all of the current changes and expansion in the roads system (Including Salik). It would be useful if we could get a composite view of the additional bridges, roads etc on one map so that we all can understand and make allowances to our travel plans. Dubai is really working hard to solve the current traffic problems but we (Motorists) need to see some information to appreciate the extent and the viability of the optional routes now coming available. Finally,whilst toll roads are not a new innovation, it will be interesting to see how many of Dubais' motorists take advantage and how many will migrate to the optional routes.

INFLATION IN THE REGION
Posted by Buddhadeb Mookerjee, Dubai, UAE on Sunday 24 June 2007 at 18:00 UAE time


One cannot agree more with Jassem Al Mannai. The hyper inflation that is sweeping through the Gulf region needs to be controlled sooner than later. Otherwise there will be far reaching effects. The region will not only lose price competitiveness but will also run into acute problem of retaining high quality expatriate workforce. Much of the gains of the current growth phase will have to be lost. So, urgent corrective measures are required before it is too late in the day.

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM