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Sun 20 Feb 2011 10:53 AM

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Abu Dhabi Jan inflation up 3.5% on higher food costs

Inflation in the emirate had been edging higher over the past year, peaking at 4.1% in Oct and Nov

Abu Dhabi Jan inflation up 3.5% on higher food costs
INFLATION REPORT: On a monthly basis, Abu Dhabis January consumer prices grew 0.1 percent, after a 0.8 percent drop in December (Getty Images)

Abu Dhabi's inflation rate rose slightly in January to post a rise of 3.5 percent from a year earlier, as food prices accelerated but housing costs were unchanged, data showed on Saturday.

Inflation in the emirate, which accounts for ten  percent of the world's oil reserves and more than 60 percent of the United Arab Emirates economy, had been edging higher over the past year, peaking at 4.1 percent in October and November.

Price growth was at 3.5 percent year-on-year in January, up from 3.3 percent in the previous month, data from Abu Dhabi Statistics Centre (SCAD) showed.

Record high global food prices, partly blamed for recent unrest and political turmoil in Tunisia and Egypt, are one of the main factors seen fuelling inflation this year in the Gulf which imports up to 90 percent of its food.

On a monthly basis, Abu Dhabi's January consumer prices grew 0.1 percent, after a 0.8 percent drop in December.

"We think inflationary pressure is contained. Our outlook is still for single-digit inflation in part because of slow money supply and credit growth," said Giyas Gokkent, chief economist at National Bank of Abu Dhabi.

"The rent category will continue to have a moderating effect on CPI because of additional supply."

Abu Dhabi, one of seven emirates that make up the UAE, only began reporting monthly inflation data at the start of 2009.

Housing and energy costs, which have a 38 percent weighting in the Abu Dhabi basket, were unchanged on a monthly basis.

Food prices, which account for more than sixteen percent of the basket, rose 0.4 percent month-on-month in January, after a 1.9 percent drop in the previous month.

"Globally, the story is around food prices going up, for instance in wheat. The rice harvest seems to be good, but certain food categories such as wheat are a problem."

Inflation in the UAE - the second largest economy in the Arab world - should remain at around two percent this year, Economy Minister Sultan Bin Saeed Al Mansouri said this month.

In a Reuters poll in December, analysts had forecast an average inflation of 2.8 percent this year.

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