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72943
Thu, 07/30/2009 - 15:15
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UAE inflation averaged 3.4 per cent in first half
Abu Dhabi, July 31, 2009 (WAM) - The UAE appears to be heading for a sharp decline in inflation through 2009 as the rate averaged about 3.4 per cent in the first half with negative year-on-year growth in June, official figures showed yesterday according to a report in Emirates Business 24|7
The consumer price index (CPI) stood at 114.24 in the first half of the year compared with 110.49 in the first half of 2008, an increase of 3.4 per cent, showed the figures released by the Ministry of Economy.
In June, the CPI slipped by 0.03 per cent to 113.05 from 113.08 in June 2008, although it was slightly higher over the previous month.
"The inflation rate in the UAE averaged 3.4 per cent in the first half of this year compared to the first half of 2008," said the ministry.
"The increase in consumer prices in the first half of 2009 was a result of a rise of about 2.7 per cent in the prices of food and beverage, 9.7 per cent in educational services and 11.3 per cent in liquor."
The report showed there was an increase of 11.3 per cent in rents, 2.8 per cent in home supplies, 5.1 per cent in transport services, 6.3 per cent in health services, 5.6 per cent in restaurants and hotels, 3.4 per cent in telecommunication services, and 5.3 per cent in other goods and services. Recreation services declined by 1.1 per cent and the prices of clothes and footwear by about 0.5 per cent, according to the ministry's index.
The figures showed inflation dropped by 0.03 per cent in June compared with the same month last year because of a decline of about two per cent in rents, 6.6 per cent in clothes and footwear prices, and 1.1 per cent in cultural services. But the CPI edged up by about 0.008 per cent to 113.05 in June from 113.04 in May after a steady fall in the previous four months of the year.
Experts believe the CPI could record negative growth in the next few months because of an expected fall in the prices of food and other consumer items during Ramadan.
The UAE recorded its highest inflation rate of 12.3 per cent in 2008 because of a surge in local rents and food prices, higher global commodity prices and a sharp increase in its import bill due to the weakening dollar.
Economists attributed the sharp slowdown in inflation this year to the strengthening dollar, falling prices of oil and other commodities, a correction in the local real estate sector and waning domestic demand.
In a recent study, the Saudi American Bank (Samba) said the UAE could have a brief period of deflation in some months this year before a recovery in domestic demand and higher import bills push the country back into price growth. "Given that housing costs make up nearly 40 per cent of the basket of goods used to measure the cost of living for an average UAE resident, a brief period of monthly negative inflation is certainly possible later this year. However, this is likely to be short lived, and we still expect annual average prices to remain positive at about one per cent. Having fallen sharply, house prices are expected to start stabilising towards the end of the year," the report said.
A breakdown for last year showed inflation climbed to a record 13.5 per cent in the second quarter from 11.9 per cent in the first quarter. It slipped to 12.9 per cent in the third quarter and receded further to 10.9 per cent in the last quarter.
Samba also cited an expected fall in the UAE population this year because of the global financial crisis for the sharp decline in inflation. But it forecast the rate would rebound to about 3.5 per cent in 2010.
"The worsening economic climate has led to expatriate redundancy, which, given that expatriate visas are generally tied to specific jobs, is synonymous with emigration," Samba said in its July economic bulletin.
"Estimating the level of net emigration is hard, but overall it seems plausible that the UAE's population could contract by up to two per cent in 2009. This will have an adverse impact on consumer demand, including for real estate. As a result, inflation could fall to just one per cent this year."
Central Bank figures released this week showed money supply growth, which is traditionally associated with inflation, has sharply slowed despite a relative improvement in liquidity in the past two months.
M2, involving M1 and quasi monetary deposits, edged up by only 2.4 per cent in June. M1, which includes currency in circulation and monetary deposits, declined from Dh220 billion to Dh218bn while M3, covering M1, M2 and government deposits, dropped from Dh931.9bn to Dh925.9bn in the same period.
The consumer price index (CPI) stood at 114.24 in the first half of the year compared with 110.49 in the first half of 2008, an increase of 3.4 per cent, showed the figures released by the Ministry of Economy.
In June, the CPI slipped by 0.03 per cent to 113.05 from 113.08 in June 2008, although it was slightly higher over the previous month.
"The inflation rate in the UAE averaged 3.4 per cent in the first half of this year compared to the first half of 2008," said the ministry.
"The increase in consumer prices in the first half of 2009 was a result of a rise of about 2.7 per cent in the prices of food and beverage, 9.7 per cent in educational services and 11.3 per cent in liquor."
The report showed there was an increase of 11.3 per cent in rents, 2.8 per cent in home supplies, 5.1 per cent in transport services, 6.3 per cent in health services, 5.6 per cent in restaurants and hotels, 3.4 per cent in telecommunication services, and 5.3 per cent in other goods and services. Recreation services declined by 1.1 per cent and the prices of clothes and footwear by about 0.5 per cent, according to the ministry's index.
The figures showed inflation dropped by 0.03 per cent in June compared with the same month last year because of a decline of about two per cent in rents, 6.6 per cent in clothes and footwear prices, and 1.1 per cent in cultural services. But the CPI edged up by about 0.008 per cent to 113.05 in June from 113.04 in May after a steady fall in the previous four months of the year.
Experts believe the CPI could record negative growth in the next few months because of an expected fall in the prices of food and other consumer items during Ramadan.
The UAE recorded its highest inflation rate of 12.3 per cent in 2008 because of a surge in local rents and food prices, higher global commodity prices and a sharp increase in its import bill due to the weakening dollar.
Economists attributed the sharp slowdown in inflation this year to the strengthening dollar, falling prices of oil and other commodities, a correction in the local real estate sector and waning domestic demand.
In a recent study, the Saudi American Bank (Samba) said the UAE could have a brief period of deflation in some months this year before a recovery in domestic demand and higher import bills push the country back into price growth. "Given that housing costs make up nearly 40 per cent of the basket of goods used to measure the cost of living for an average UAE resident, a brief period of monthly negative inflation is certainly possible later this year. However, this is likely to be short lived, and we still expect annual average prices to remain positive at about one per cent. Having fallen sharply, house prices are expected to start stabilising towards the end of the year," the report said.
A breakdown for last year showed inflation climbed to a record 13.5 per cent in the second quarter from 11.9 per cent in the first quarter. It slipped to 12.9 per cent in the third quarter and receded further to 10.9 per cent in the last quarter.
Samba also cited an expected fall in the UAE population this year because of the global financial crisis for the sharp decline in inflation. But it forecast the rate would rebound to about 3.5 per cent in 2010.
"The worsening economic climate has led to expatriate redundancy, which, given that expatriate visas are generally tied to specific jobs, is synonymous with emigration," Samba said in its July economic bulletin.
"Estimating the level of net emigration is hard, but overall it seems plausible that the UAE's population could contract by up to two per cent in 2009. This will have an adverse impact on consumer demand, including for real estate. As a result, inflation could fall to just one per cent this year."
Central Bank figures released this week showed money supply growth, which is traditionally associated with inflation, has sharply slowed despite a relative improvement in liquidity in the past two months.
M2, involving M1 and quasi monetary deposits, edged up by only 2.4 per cent in June. M1, which includes currency in circulation and monetary deposits, declined from Dh220 billion to Dh218bn while M3, covering M1, M2 and government deposits, dropped from Dh931.9bn to Dh925.9bn in the same period.
