How rising inflation is affecting UAE?

Lately, the Central Bank of the United Arab Emirates declared that it would raise its base rate by 50 basis points making it 2.25 percent.

This was done in tandem with the Federal Reserve of the USA’s decision, as the UAE dirham is pegged to the US dollar at a fixed exchange rate of 3.67 to combat inflationary pressures in the oil-dependent economy.

Inflation in UAE:

Data from the National Bureau of Statistics shows that Yearly inflation in the country has scaled up to 2.58 percent in November 2021, compared to 1.86 percent in the previous month. Inflation rose for the fourth month in a row, reaching its highest level since September 2018. F&Bs, dining and hotels, realty and utilities, and miscellaneous enterprises all felt the inflationary heat.

Fuel costs have risen by 20% in the last two months, with vehicle owners might face a double-digit hike in the future months owing to Russia’s military assault against Ukraine, which began on February 24 and sent the world economy into a tailspin. The transportation component of the UAE’s consumer price index (CPI) saw the highest increase last year, rising 18% year on year by December and averaging 9% over 2021. Fuel and automobile prices have surged drastically in recent years.

Inflation in different sectors:

Talking about other sectors, Housing (34.1%), food and soft drinks (14.3%), and transportation (14.3%) are the primary components of CPI in the UAE.

  • 6% inflationary hike in Education, for example, contributes to 7.7%.
  • Miscellaneous products and services (6.3%).
  • Furniture and household goods (5.6%).
  • Communications (5.4%).
  • Restaurants and hotels (4%).
  • Recreation and culture (3.2%).
  • Textiles, apparel, and footwear (3.2%).
  • Medical care (1.4%).
  • Beverages and tobacco (1.4%) and (0.3 percent) respectively.

The CPI in the UAE tracks changes in consumer prices for a basket of goods and services. As per the data, the country’s average annual inflation rate between 2008 and 2022 was 2.2 percent. Since then, the average hike in the prices of commodities is 28.97%.

Realty and renting:

After a 40% drop due to the raging pandemic, Dubai rents rise as a result of the Covid-19 recovery and increase by up to 25% by 2021.

According to the Dubai Land Department’s Real Estate Regulatory Agency (RERA) guidelines, tenants could anticipate paying between 5% and 20% more on their annual rental leases.

Read more: Sustainability with safety: What do the new e-scooter rules of Dubai say?

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