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UAE inflation rate rises to 9.3%
The UAE's inflation rate rose by a third last year, driven by the rising cost of accommodation, according to government statistics released on Wednesday.
Last year's inflation rate stood at 9.3%, up from 6.2% in 2005, but not as high as previous estimates of 10%.
The Consumer Price Index, on which the level of inflation is measured, increased to 133.0 points, up from 121.7 in 2005.
The greatest rise in living expenses was seen in the 'House Rent & Related House Items’ category.
Housing costs rose by 15.3% last year, up from 9.4% in 2005, and now represent 36.1% of all expenses for a family living in the UAE, according to official statistics.
The price of transportation and communication also saw a marked increase last year, with a rise of 9.5% compared with 4.6% the year before.
Official figures show transportation and communication costs formed almost 15% of a family’s expenses in 2006.
The rate of price increases was higher in five of the eight groups that make up the Consumer Price Index.
‘Food, Beverages & Tobacco’, ‘Clothes, Textile & Footwear’ and ‘Other Goods and Services’ all experienced small increases, while ‘Furniture & Related Items’, ‘Medical Care & Health Services’ and ‘Recreational, Education’ saw a minor drop in inflation.
Sheikha Lubna Al-Qasimi, UAE Minister of Economy, said a 31.5% increase in the price of fuel products in 2005 led to an increase in production prices, which eventually elevated and directly affected the UAE’s inflation rate.
Other reasons behind the increase in the price of goods and services was the rise in demand for real estate caused by the country’s economic growth, she added.
Sheikha Lubna said the weak US dollar also affected the price of products and services, due to its impact on UAE exports.
The minister assured that the Ministry of Economy was working to reduce inflation growth through mechanisms such as the consumer protection unit, formed last year, which she said has succeeded in reducing the cost of some goods.
The UAE government is keen to lower inflation as it tries to maintain its current level of economic growth.
If inflation levels do not drop there is the danger that soaring cost of living will deter workers from living in the Emirates, which could cause damage to the country’s economy.
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Posted by MOHAMMAD GHOUSE BESIX, Dubai, UAE on 21 June 2007 at 18:00 UAE time
If inflation rises like this it is difficult to survival in UAE. till June the inflation is like this, what about at the end of the year. economists give most concentration to decrease the inflation. All the prices are increasing. Think about common person and his family.
Posted by Simon, Dubai, U. A. E on 21 June 2007 at 13:00 UAE time
The inflation rise is very alarming. There is no boubt that U. A. E is making a phenomenal progress. However, for the economy to sustain and to strike a balance, U. A. E should seriously look at measures to control the inflation rate. If not, the common man and even the upper middle class will find it very difficult to survive when it's so hard to meet ends meet.
Posted by AK, Dubai, U.A.E on 21 June 2007 at 12:00 UAE time
The cost of living has drastically increased in the three years that I have lived in Dubai. The largest increase has been in housing rent, which in my case had been over 45% over three years. Being an IT professional, I am fortunate to be able to afford this without making major lifestyle changes, although its has changed. Having worked in the US and India, my reasons for moving to Dubai were, a better lifestyle and tax savings (resulting in increased savings). However, the rent alone offsets any tax advantages that Dubai has to offer, add near stagnant salary increments, and Dubai is not a value proposition any longer. Further, with salaries in India improving dramatically, enabling a higher standard of living, I am beginning to consider moving back to Delhi, would be a smart move. My friends and colleagues in IT, are no longer interested in moving to Dubai, due to high living costs resulting in NIL Savings, and slow professional growth (salaries). These are the very professionals who have jumped to an opportunity to move to Dubai just 4-5 years ago. Dubai needs to assess the brain-drain that is being caused due the rising cost of living here. This loss of human capital will become an unavoidable road-block in path of growth for Dubai. Regards, AK
Posted by ismail, Dubai on 21 June 2007 at 11:00 UAE time
Hi,
Every one talk about the Rental and house price but I don't see any solution for that, it's been their for last few years,
If you compare the rest of world u don't see that much rent increase or house price, I hope someone take quick action before it's out of hand and people start leave country
Posted by Rohinton Bilimoria, Dubai, UAE on 21 June 2007 at 11:00 UAE time
Ministry should curb the rental increases. In 2004 a two bedroom apartment was about AED36 to 40K; today it is 120K, therefore the rents have increased three fold in three years, which is ridiculous. The rent increases from time to time has compelled the vendors to shift the burden on the consumer. Therefore the every household has experienced increase in their day to day expenses. Fuel has gone up and so has the traffic jams leading to an increase in the conveyance expenses. Few of the expat communities once harping on living only in villas with minimum of three cars, two dogs and a boat have realised the pinch and have either left the country or have started sharing the villas with other families from same nationality and have given given up keeping dogs and boats. What does that go to prove. Inflation is going up and it is only the Government who can bring in the controls.