From fuel to food to rents: How inflation has impacted rising prices in the UAE

The biggest uptick in the UAE’s consumer price index (CPI) last year was in the transport component

On Wednesday, the Central Bank of the UAE (CBUAE) announced that it would increase its base rate by 50 basis points to 2.25 per cent.

This came into effect in sync with the United States of America’s Federal Reserve’s move — the UAE dirham is pegged to the US dollar at the fixed exchange rate of 3.67 — amid the oil-dependent economy’s bid to stave off inflationary pressures.

Data from the UAE’s National Bureau of Statistics shows that the annual inflation increased to 2.58 per cent in November 2021, from 1.86 per cent in the previous month. It was the fourth consecutive month of rising inflation, and the highest since September 2018. The inflationary pressures were felt in the unprecedented rising costs of transport — a litre of petrol and diesel costs Dh 3.66 (Super 98) and Dh4.08, respectively, as of Friday — food and beverages, restaurants and hotels, housing and utilities and miscellaneous goods and services.

There has been a 20 per cent rise in fuel prices over the past two months, as motorists are staring at a double-digit increase in the coming months following Russia’s military aggression on Ukraine that started on February 24 and consequently the global economy went into a tizzy.

The biggest uptick in the UAE’s consumer price index (CPI) last year was in the transport component, which rose to 18 per cent year-on-year by December and averaged a nine per cent rise over 2021. The spike in fuel prices and vehicle costs have risen sharply over the last year.

In the UAE, the main components of CPI — on the national index that has a base of 100 as of 2014 — are housing (34.1 per cent of the total weight); food and soft drinks (14.3 per cent) and transportation (14.6 per cent). Similarly, education accounts for 7.7 per cent; miscellaneous goods and services (6.3 per cent); furniture and household goods (5.6 per cent); communications (5.4 per cent); restaurants and hotels (4 per cent); recreation and culture (3.2 per cent); textiles; clothing and footwear (3.2 per cent); medical care (1.4 per cent) and beverages and tobacco (0.3 per cent).

In the UAE, the CPI measures changes in the prices paid by consumers for a basket of goods and services.

UAE INFLATION RATES

2017: 1.97% (0.35% increase from 2016)

2018: 3.07%, (1.1% increase from 2017)

2019: -1.93%, (5% decline from 2018)

2020: -2.08% (15% decline from 2019)

The average annual inflation rate in the UAE between 2008 and 2022 was 2.2 per cent, according to available statistical data. Overall, the gross increase in the price of a commodity is 28.97 per cent between 2008 and 2020. So, a commodity that would cost Dh100 in 2008 could be bought in early 2021 for Dh128.97.

UAE FUEL PRICES: A STEEP CLIMB

UAE MILK PRICES GO UP NORTH

DUBAI RENTS SPIKE ON THE BACK OF COVID-19 RECOVERY

2015-2020: 40% slump owing to the raging contagion

2021: Up to 25% increase

However, tenants are expected to pay between 5% and 20% more on their annual rental leases in line with the Dubai Land Department’s Real Estate Regulatory Agency (RERA) norms.

Can the UAE stave off the inflationary challenges following a disruption in the global economy due to the Ukraine conflict? Experts feel the country's fundamentals are resilient and can absorb the shock unlike several developed economies.

Zawya