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Tue 15 Mar 2011 12:26 PM

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Dubai Feb inflation hits 12-month high on food costs

Food costs, which account for 11% of the Dubai basket, rose by 2.7% in February

Dubai Feb inflation hits 12-month high on food costs
(Getty Images)

Dubai inflation edged up 0.9

percent on an annual basis in February, the highest level in a

year, as food and transportation costs rose from the previous

month, data showed on Tuesday.

Annual inflation in the UAE member state

hovered below 1 percent for most of 2010, as lending and the

property sector remained weak following debt problems

experienced by some state-owned companies, although trade has

picked up strongly.

Annual inflation stood at 0.4 percent in January.

On a monthly basis, consumer prices in Dubai increased by

0.2 percent in February, after a 0.1 percent fall in the

previous month, data from the Dubai Statistics Centre showed.

The UAE central bank governor said in March he saw inflation

in the country ranging around "very low" single-digit rates.

"Items driving up annual inflation have included transport

because of the rise in gasoline prices, and the food category

has gone up in line with expectations due to global trends,"

said Giyas Gokkent, chief economist at the National Bank of Abu

Dhabi.

Food costs, which account for 11 percent of the Dubai

basket, rose by 2.7 percent in February after a 1.6 percent drop

in January.

The UAE will start subsidising rice and bread next month to

combat rising food prices, state news agency WAM reported,

adding that the reduction would run from April 1 to the end of

the year.

Transport costs rose slightly by 0.2 percent month-on-month

in February, down from 0.3 percent in the previous month.

"The housing category will continue to play a moderating

effect on inflation, but the risk to Dubai CPI is on the upside

because of price pressures in other categories. We project that

the average Dubai inflation rate might be around one percent at

the end of 2011," Gokkent said.

Housing prices, the largest consumer expense at almost 44

percent, dropped 1.2 percent after a 0.1 percent increase in the

previous month.

Rising living costs in Arab countries are one of the driving

forces behind the revolts that have toppled leaders in Egypt and

Tunisia and are now challenging autocratic regimes in Libya as

well as nearby Bahrain and Oman.

The UAE, the world's third-largest oil exporter, has escaped

the unrest so far. Its small local population has one of the

world's highest economic outputs per capita at over $47,000.

The IMF forecasts Dubai's economy to grow by 2.8 percent

this year, up from 0.5 percent in 2010.

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