Abu Dhabi’s Inflation Rises 2.1% In 2014

Abu Dhabi’s inflation rate edged up 2.1 per cent during the first two months of 2014 compared with the same period last year while it increased 2.5 per cent in February, new data has shown.

According to the Abu Dhabi Statistics Centre (SCAD), the emirate’s consumer price index (CPI) rose 2.3 per cent during the first two months of 2014 compared with the same period last year while it increased 2.6 per cent in February.

The rise in consumer prices pushed up costs in Abu Dhabi region by 2.1 per cent and around 2.3 per cent in Al Ain and Al Gharbia region, the report said.

Food and non-alcoholic beverages accounted for the largest increase in the index during the first two months of 2014, up 29.7 per cent year-on-year. The rise in food prices in various sub-groups such as fish and seafood, beverages such as coffee and tea along with vegetables contributed to the overall increase.

Housing, water and electricity costs were found to have contributed around 25 per cent to the overall increase in the CPI, with prices rising 1.5 per cent in the last two months.

Communication prices declined in this period by 0.2 per cent compared to the corresponding period last year, the report added.

In February, restaurants and hotels experienced the highest price increase as costs rose 6.6 per cent, followed by miscellaneous goods and services, whose prices rose 4.5 per cent.

Average consumer prices rose 0.2 per cent month-on-month in February. Prices of miscellaneous goods and services rose significantly month-on-month by four per cent, according to SCAD.

Economists have forecast the UAE’s inflation rate to be above four per cent this year, the highest since the record 12.3 per cent in 2008 prior to the global economic meltdown.

But a surge in inflation could prove tricky for the UAE to contain because its dirham currency is pegged to the U.S. dollar, making it hard for the central bank to tighten policy while U.S. interest rates remain very low, according to Reuters.

Average inflation in the UAE accelerated to 1.1 per cent in 2013, the highest rate since 2009, from 0.7 per cent in 2012, which was the lowest level since 1990.

Economists have also warned the country’s policy makers to reign in inflation to achieve sustainable growth.