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Stagflation in the UAE
The International Monetary Fund is warning that inflation in the UAE is running at 10 percent and will stifle economic growth this year.
Dubai's inflation could be even higher than the UAE figure, the IMF cautions.
While the IMF is right to highlight the dangers of inflation to an economy, some economic observers, including the leader writer of UAE broadsheet Gulf News, are becoming hysterical in their analysis.
"Stagflation fears stalk the UAE," screams an editorial in today's (Tuesday's) Gulf News, which goes on to talk about stalling growth and spending power evaporating.
Stagflation is a highly emotive term, conjuring up images of Hitler's pre-war Germany or today's Mugabe-pillaged Zimbabwe.
The term can be used for more benign situations than that - it technically refers to an economic condition in which rising prices, high unemployment and little or no economic growth are present - but should certainly be used with extreme care because of its frightening connotations.
Today's UAE is not facing stagflation - not even close.
Prices are certainly rising, despite caps on costs like housing and school fees, but the economy is continuing to grow at double-digit rates and the country faces no unemployment problems, and is unlikely to ever face them.
It is also worth noting that inflation spiked last year, with no effect on economic growth or unemployment.
The IMF is right to strike a cautious note when it comes to the economic impact of inflation, but commentators should be dispassionate in their use of language to describe economic conditions, or risk deterring foreign investors that are crucial to the sustainable development of GCC countries.
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